MarketsJun 23, 2026
Why Energy Stocks Are Underperforming Despite Rising Cash Flows
Market Divergence
Rhea Lobo
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Analyst forecasts for free cash flow at Exxon Mobil, Chevron, and ConocoPhillips have risen a combined $60B for this year and next, yet the US energy sector's stocks are now lower than before the Iran conflict began.
For the two largest refiners in the benchmark energy index, Valero and Marathon, free cash flow expectations are up $18B.
Across those five companies, that's a 53% increase in distributable cash, yet the sector is trailing both the broader market and tech stocks by a wide margin.
The entire US energy sector is worth half as much as Nvidia alone. The three largest producers combined add up to less than Micron, which also operates in a notoriously cyclical business.
Private and government stockpiles of oil and refined products have been depleted globally. Countries will have to refill them, locking in extra demand. Nations caught short, like India and Australia, may overcompensate in their purchases.
Oil prices have been choppy. Brent crude fell to $77.45 a barrel and West Texas Intermediate dropped to $73.52 as markets monitored tanker traffic through the Strait of Hormuz on Tuesday.
Iran declared Hormuz closed over the weekend while US Central Command said the strait remained open, creating conflicting signals for traders. President Trump said 19M barrels flowed through the strait on Monday, describing it as a record, though CNBC could not immediately verify that figure.
US-Iran peace talks in Switzerland drew cautious optimism. Vice President JD Vance said Iran had agreed to allow nuclear inspectors to return as early as this week, though Tehran didn't publicly confirm broader site access.
"Even with a provisional peace deal and an assumption of a timely reopening of the Strait of Hormuz, the infrastructure damage, low oil and gas inventories and the time it will take to re-establish global energy supply chains means we may need to prepare for at least several months of further energy shortages," said Albert Chu, Portfolio Manager, Man Group.
The US Treasury separately issued a 60-day license authorizing the production, delivery, and sale of Iranian oil, including imports to the US payable in dollars. The license expires Aug. 21.
Citi Research's Scott Chronert said oil price trading patterns suggest markets are growing more confident a resolution is near, and that the energy price overhang and its inflation implications should ease in the months ahead.
Energy booms historically spur exploration spending that eventually weighs on prices, but the Hormuz disruption hasn't lasted long enough to trigger that cycle yet. That window of elevated cash flows, depleted inventories, and geopolitical premium for stable Western Hemisphere reserves is what the market appears to be underpricing.
