What Happened?
A number of stocks jumped in the afternoon session after crude oil pushed back above $100 a barrel, with Brent near $111 and WTI close to $108.
The move followed fresh comments from President Trump that "the Clock is Ticking" for Iran, a drone attack on the UAE's Barakah nuclear plant over the weekend, and the continued closure of the Strait of Hormuz, a chokepoint that normally carries about 20% of the world's oil.
The Energy Select Sector SPDR Fund (XLE) gained roughly 2.4%, with Exxon, Chevron and ConocoPhillips leading. Supply data added to the squeeze: U.S. crude inventories fell 4.3 million barrels in early May, dropping below the five-year average, while natural gas futures jumped. The risk for investors remained symmetrical as any de-escalation could reverse the move just as quickly.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Oilfield Services company Borr Drilling (NYSE: BORR) jumped 4.9%. Is now the time to buy Borr Drilling? Access our full analysis report here, it’s free.
- Oilfield Services company Core Laboratories (NYSE: CLB) jumped 4.4%. Is now the time to buy Core Laboratories? Access our full analysis report here, it’s free.
Zooming In On Borr Drilling (BORR)
Borr Drilling’s shares are extremely volatile and have had 51 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock gained 3.4% on the news that oil prices climbed amid geopolitical uncertainty following the U.S. rejection of a peace proposal from Iran.
West Texas Intermediate crude rose over 2.5% to around $97.89 per barrel, while Brent crude, the international benchmark, also gained more than 2.6% to approximately $104 per barrel. The price increase followed President Trump's dismissal of Iran's latest peace proposal as "TOTALLY UNACCEPTABLE!" This development heightened market concerns about the ongoing conflict. For energy producers, higher oil prices can directly translate to increased revenue and profitability, which typically drives positive investor sentiment.
Borr Drilling is up 65.8% since the beginning of the year, and at $6.62 per share, has set a new 52-week high. Investors who bought $1,000 worth of Borr Drilling’s shares 5 years ago would now be looking at an investment worth $3,445.
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