Although we don’t believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes — just in case they’re material to our investing thesis.
America is on the brink of another war. In the words of Motown songwriting legend Barrett Strong, war is nothing but a heartbreaker and friend only to the undertaker. But this time, oil companies love the boiling tension in Syria, and energy investors are already reaping the rewards.
The Syrian crisis is a direct threat to one of the world’s richest sources of crude oil. That’s why oil prices are skyrocketing right now, with various grades of crude oil jumping about 3% overnight. Shares of oil giant Exxon Mobil Corporation (NYSE:XOM) have responded with a 1.9% price surge as of 1:30 p.m. EDT, and Chevron Corporation (NYSE:CVX) scored an even larger 2.6% gain. Combined, the two oil stocks account for most of the Dow Jones Industrial Average (INDEXDJX:.
Remember that this is just the rattling of sabers at dawn. If U.S. forces attack Syria via air raids or cruise missiles, as military leaders say they might do later this week, oil prices could spike much higher. This could be a very opportune time to buy Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM) shares, albeit on very cynical grounds.
Though environmental activists might disagree, investors typically don’t have to grapple with moral quandaries before buying Exxon Mobil Corporation (NYSE:XOM) shares. The business was built on a nonrenewable resource and all, but it’s not exactly evil to exploit modern society’s thirst for the black gold.
But at this particular moment, oil stocks are a kind of “sin stock.” If oil prices skyrocket 40% in a week, as some experts say they might if we go to war in Syria, isn’t that akin to price-gouging consumers at the gas station when a hurricane is rolling into town?
Then again, nobody expects Chevron Corporation (NYSE:CVX) to shut down its international operations over this political conflict. That would just drive prices even higher as American suppliers drop out of the global oil trade. In the end, the oil giants are just playing the hand they’re dealt and charging prices set by a free market.