Oil prices jumped on 19 February 2026 as Iran-US tensions flared near the Strait of Hormuz, pushing Brent above US$70 and lifting market volatility. For ASX energy stocks, higher crude can support earnings and dividends, but a diplomatic shift could unwind the move quickly.
Oil prices jumped more than 4% on 19 February 2026. Brent crude climbed above US$70 per barrel, while West Texas Intermediate (WTI) settled at US$65.19. The trigger was a sharp escalation in tensions between the United States and Iran, with nuclear talks stalling on key demands and both sides increasing military activity near the world's most important oil shipping route. For investors in ASX energy stocks, this matters. Higher oil prices can lift earnings, boost dividends, and reshape the outlook for Australia's biggest energy producers.
The tension is centred on the Strait of Hormuz, a narrow waterway between Iran and Oman. According to the U.S. Energy Information Administration (EIA), around 20 million barrels of oil flow through this strait every day, roughly 20% of global petroleum consumption. There is no real alternative route.
This week, Iran's Revolutionary Guard ran live-fire military drills near the strait and briefly shut down parts of the waterway. The U.S. has sent two aircraft carriers to the region. Nuclear talks in Geneva on 17 February produced an agreement on broad "guiding principles," according to Iranian Foreign Minister Abbas Araqchi, but stalled over core U.S. demands. Vice President JD Vance said the following day that Iran had not addressed key American red lines and that President Trump is prepared to use military force.
Oil markets have swung sharply throughout February, spiking in late January on conflict fears, dropping nearly 5% on 2 February when tensions cooled, and now surging again. This shows how sensitive oil prices remain to Middle East headlines.
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Beyond the geopolitics, the underlying market tells a mixed story. On the bearish side, BloombergNEF forecasts global oil supply will exceed demand by 3.2 million barrels per day in 2026. That points to an oversupplied market if conditions stay calm.
On the bullish side, Iran pumps around 3.3 million barrels per day. If those exports were fully cut off, the surplus would vanish. BloombergNEF estimates Brent crude could average US$91 per barrel by Q4 2026 in that extreme scenario. Even without full disruption, the geopolitical risk premium adds an estimated US$7 to US$10 per barrel.
Most experts think full-blown conflict is unlikely. But the threat alone is enough to keep prices elevated.
When oil prices rise, Australian energy producers tend to benefit. The S&P/ASX 200 Energy Index (XEJ) tracks 11 companies with heavy oil and gas exposure, and higher crude prices flow through to stronger earnings and dividends.
Woodside Energy (ASX: WDS), Australia's largest independent oil and gas company, is especially sensitive to price changes. Broker E&P estimates that every US$10 per barrel move in crude leads to roughly a 40% swing in Woodside's net profit. With shares recently trading around A$27 and analyst targets as high as A$31.58, the stock has room to re-rate if prices stay elevated. Woodside reports its 2025 annual results on 24 February.
Santos (ASX: STO) is another beneficiary, with its Cooper Basin and PNG LNG assets generating stronger cash flows when oil prices rise. APA Group (ASX: APA) offers a different angle through contracted gas pipeline revenues and a yield above 6%.
Investors can track momentum signals and sector trends across ASX energy stocks in real time using ASR's HALO platform.
Higher oil prices are not guaranteed to last. A diplomatic breakthrough between the U.S. and Iran could send prices falling fast. OPEC+ could ramp up production. A slowdown in China, which buys a large share of Gulf oil, would hurt demand. And for ASX-listed producers, a rising Australian dollar reduces the value of US-dollar oil revenues when converted back to A$.
The Iran-U.S. standoff has lifted oil above US$70 per barrel, with geopolitical risk now a major price driver. ASX energy stocks, particularly Woodside and Santos, stand to gain if higher prices hold, but the situation can shift quickly. For deeper research and stock-specific analysis, download ASR's free market outlook report.
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