Energy Stock Bulls Cheer as Sector Rallies Amid Geopolitics

(Bloomberg) -- Investors have a few reasons to pay closer attention to the energy sector this week.

The S&P 500 Energy Index kicked off the week with a 2.1 percent gain to its highest intraday price since February 2 as it outperforms the other S&P sectors. Shares were lifted by West Texas Intermediate crude futures rising above $70 a barrel for the first time since November 2014 as traders braced for the possibility that U.S. sanctions could be reimposed on Middle East crude producer Iran.

Geopolitical risks aren't the only factor pushing energy stocks higher this year, as Wall Street's strategists have turned bullish as of late and have been rotating into the space and away from the technology and financial sectors. Investors are also clinging to the theme of capital discipline among energy producers.

“We see a stronger case for investing in energy equities over crude itself or energy-related debt,” BlackRock's global chief investment strategist Richard Turnill said in commentary on Monday. “Oil prices have run well ahead of energy stocks this year but this trend has started to turn.” BlackRock is positive on exploration and production firms and midstream companies, and also sees “some” opportunities in emerging market energy stocks.

To contact the reporter on this story: Michael Bellusci in Toronto at mbellusci2@bloomberg.net.

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Steven Fromm

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