Oil prices have surged after fresh disruption fears in the Strait of Hormuz, and ASX energy stocks have moved fast in response. Woodside (ASX: WDS) jumped sharply as investors priced in tighter supply and higher Brent. Here’s what’s driving the move and what to watch next.
It was a dramatic Monday on the ASX. While the broader market slipped 0.5%, energy stocks told a completely different story. Woodside Energy (ASX: WDS) shot up 7.7% to A$30.50. Santos (ASX: STO) surged 7.8%. The reason? A major crisis in the Middle East sent oil prices soaring overnight. Brent crude jumped roughly 13% over the weekend to above US$82 a barrel, and Australian oil and gas producers are right in the action. For investors watching the energy sector, this is the kind of event that can reshape returns for months.
Over the weekend, US and Israeli forces struck Iran, killing Supreme Leader Ali Khamenei and several top officials. Iran hit back with missile attacks against Israel and Gulf neighbours, including Saudi Arabia, the UAE, and Qatar.
The biggest concern for oil markets is the Strait of Hormuz. This narrow waterway between Iran and Oman carries about 20% of the world's oil supply, around 20 million barrels every day (US Energy Information Administration). It is the most important oil shipping route on the planet.
Right now, that route is effectively shut down. Maersk suspended all crossings. Hundreds of tankers are sitting idle on both sides. Iran's Revolutionary Guard warned ships that passage was not allowed and struck three oil tankers on Sunday.
This is not just fear pushing prices up. Real barrels of oil are stuck. Energy data firm Kpler described it as a de facto closure for commercial shipping. Insurance companies have pulled coverage, and that alone has stopped most traffic.
OPEC+ responded by agreeing to add 206,000 barrels per day from April. But analysts say this is largely a paper increase, because most of that extra capacity sits in Gulf nations whose exports still need to pass through the blocked Strait. As Rystad Energy's Jorge Leon put it, the move is "a signal, not a solution." If the disruption drags on, Wood Mackenzie analysts warn Brent could push past US$100 a barrel.
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Higher oil prices flow almost directly into higher revenue for producers like Woodside, Santos, and Beach Energy.
Australia has a unique advantage here. Australian LNG facilities sit far from the conflict zone, giving them a supply security edge that Gulf producers cannot match. Qatar, the world's largest LNG exporter, ships its cargoes through the Strait of Hormuz. Any prolonged disruption could send global LNG spot prices sharply higher, creating further upside for Australian producers.
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Woodside delivered record production of 198.8 million barrels of oil equivalent in 2025, beating its own guidance. Full-year profit was US$2.718 billion, and the board paid out US$2.1 billion in fully franked dividends at an 80% payout ratio.
Production guidance for 2026 is lower at 172 to 186 MMboe due to planned Pluto LNG maintenance. But higher oil prices could more than offset lower volumes on total revenue. The Scarborough LNG project, 94% complete, is on track for its first cargo in late 2026, adding a meaningful growth catalyst.
This rally could reverse quickly if tensions ease and shipping resumes. Woodside's 2026 output guidance is already softer. The company is led by Acting CEO Liz Westcott following Meg O'Neill's departure to become CEO of BP from April 2026, with a permanent appointment still pending, and longer-term China demand remains uncertain.
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