Investing.com – Steep energy price jumps have typically led to a key index of European stocks rising by as much as 2.3% over the next one to six months, according to analysts at BofA Securities.
In a note to clients, the strategists including Paulina Strzelinska noted that internal research indicated that this upward trend has happen roughly 70% of the time.
They added that, during such events, so-called “high quality” stocks — stable companies with low debt and consistent profits — performed the best, while banks general performed worse than other sectors.
Oil and prices have surged following joint U.S. and Israeli strikes against Iran over the weekend. The conflict, which has now widened to include strikes by both sides on countries across the Middle East, has led to a choking off of crucial energy supplies which typically traverse the vital Strait of Hormuz waterway.
Roughly a fifth of the world’s oil and liquefied natural gas pass through the strait south of Iran, making it a crucial chokepoint for global energy supplies. Traffic has built up on either side of the narrow geographic passageway, although President Donald Trump has suggested that the U.S. could insure and escort vessels in an attempt to relieve the bottleneck.
Prior to the start of conflict, futures — the global benchmark — were exchanging hands at roughly $73 a barrel. The contract was last up by 2.1% at $83.14 a barrel. U.S. West Texas Intermediate crude futures also rose.
Benchmark natural gas prices in Europe, a major importer of LNG, were up 4.7% at 51.07 euros per megawatt hour, compared to around 31 euros/MWh a week ago.
According to BofA, European stocks that have consistently delivered positive returns during historical oil price spikes of at least 10% include , , , , and . Following natural gas increases of at least 15%, and have been shown positive returns, the analysts said.
