Bank of America has increased its price targets for two major U.S. oil companies as instability in the Middle East pushes a higher risk premium into global energy markets.
In a note, analyst Jean Ann Salisbury said the bank raised its target for ExxonMobil (XOM) to $151 from $135, and for Chevron (CVX) to $206 from $188, explaining the adjustments as a response to the "increased oil risk premium baked into stock prices."
The revisions follow U.S. strikes on multiple targets in Iran over the weekend. While BofA said there have been no reports of "major confirmed damage to core oil infrastructure," the bank warned that a critical chokepoint for global energy flows has been affected.
BofA flagged transit through the Strait of Hormuz as the principal risk channel, citing reports that oil and LNG tankers "received radio communications from Iran's military that no ship was allowed to transit." The bank noted that the strait handles roughly 14 million barrels per day - about 14% of global oil supply - and around 80 million tonnes per annum, or 20% of global LNG flows.
Although Iran's country-level oil and gas production remains largely intact, interruptions to shipping have already pushed crude prices higher. BofA noted that "at the open of Sunday trading, Brent surged $10/bbl from Friday to >$82/bbl."
Looking ahead, the bank expects near-term crude price impacts in a range of $10 to $20 per barrel, while noting that the effect could dissipate if passage through the strait is restored quickly. BofA identified "LNG and oil beta equities" as the segments likely to benefit most from the higher risk premium, with refiners expected to gain to a lesser degree.
BofA also pointed to OPEC+ plans to restore 206,000 barrels per day in April, but observed that the effective delivery of those volumes depends on safe passage through the Strait of Hormuz.
Summary
Bank of America raised price targets for ExxonMobil and Chevron to reflect an elevated oil risk premium following U.S. strikes on targets in Iran and reports of interference with tanker transit through the Strait of Hormuz. The bank expects a short-term crude price impact of $10 to $20 per barrel and highlights energy-focused equities as the most direct beneficiaries.
Key points
- BofA increased price targets to $151 for XOM (from $135) and $206 for CVX (from $188) to account for a higher oil risk premium.
- Disruptions to shipping via the Strait of Hormuz - which carries about 14MMbpd or 14% of global oil and 80MMtpa or 20% of global LNG - are the main channel for market impact.
- The bank expects oil and LNG-focused equities to benefit most, with refiners seeing smaller gains; OPEC+ plans to restore 206,000 bpd in April but those volumes depend on secure transit.
Risks and uncertainties
- Potential interruptions to maritime transit through the Strait of Hormuz could cause sustained price volatility in crude and LNG markets, affecting energy producers and shipping-related sectors.
- Price shocks - BofA projects near-term crude impacts of $10 to $20 per barrel - could alter earnings outcomes and valuations for oil and gas companies as well as downstream refiners.
- The situation hinges on maritime access; if the strait is closed or contested, the delivery of OPEC+ restoration volumes could be constrained, limiting the effectiveness of planned supply additions.