Despite the War, Energy Stocks Are Cheap

Article from The Wall Street Journal. Published Tuesday, May 12, 2026. Written by Jinjoo Lee.

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• Energy stocks have seen the largest disconnect between rising profits and stagnant stock prices of any S&P 500 sector since the war began — earnings expectations are up 58%, yet prices have barely moved. Oil prices near $100/barrel and a massive supply disruption from the Hormuz closure haven't translated into higher stock prices, creating a rare value opportunity.

• Energy companies are also behaving more prudently this cycle, prioritizing buybacks and debt paydown over reckless drilling, which should support long-term shareholder value.

  • Energy P/E has collapsed ~34%, putting the sector at under 14x forward earnings — 36% cheaper than the broader S&P, versus a 29% average discount over the past decade.

  • EPS expectations for energy are up 58% since the war started, yet stock prices are only ~2% higher.

  • Oil majors and shale producers are largely holding capex flat, so no supply flood is coming.

  • Shale producers (e.g., Diamondback, EOG) are shelving variable dividends in favor of buybacks and debt reduction.

  • Even if Hormuz reopens, oil prices likely stay elevated due to stockpile rebuilding and slow well restarts.

It's worth noting that FANG (Diamondback) is up ~15% from Feb 27th and EOG is up ~9.7% from that same time, so the stock price has moved with some volatility through the year so far, often trading on headlines. Despite this there seems to be far more upside left to capitalize on even if peace talks are successful.