Brent crude futures surge amid Middle East conflict, boosting European oil giants

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Brent crude futures surge amid Middle East conflict, boosting European oil giants
Credit: © Reuters.

The ongoing conflict in the Middle East has led to a significant increase in Brent crude futures, which have escalated by 6%, currently trading at $89 a barrel as of Tuesday. This surge is anticipated to boost revenues for commodity-related sectors, particularly benefiting European oil giants BP (NYSE: BP ), Shell (LON: SHEL ), and TotalEnergies (EPA: TTEF ). These companies have seen their shares rise between 4.5% and 7%.

Europe's oil and gas sector has reached nine-year highs, demonstrating an annual growth of 8.3%, outpacing the STOXX 600’s growth of 6%. Analysts forecast an end-year price for Brent crude at $88 a barrel, suggesting a potential stabilization in the market.

Despite the positive outlook for the oil and gas sector, Goldman Sachs (NYSE: GS ) projects a 2% reduction in inflation-adjusted European earnings this year. This prediction stems from the threat posed by rising bond yields on debt costs, as highlighted by analysts.

However, Goldman Sachs also predicts a higher earnings growth of 7% next year. The firm anticipates that oil prices will hit $100 per barrel by the end of 2024, leading to companies seeing a real terms annual profit growth of 5% through 2025.

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