- The consensus opinion amid Iraq's convulsion is positive on energy stocks and negative on U.S. retailers and other consumer stocks given that oil prices are likely to remain elevated and provide another headwind for consumers already struggling with slow wage growth and high personal debt.
- The S&P 500 energy sector is up 5.4% in the past month as Brent crude has climbed, and up 10% YTD; with the strong correlation between oil shocks and economic recessions, concern is growing that Iraq's chaos could derail the global economy.
- But some analysts are beginning to say energy stocks are too rich and could quickly give up gains if the Iraq crisis is defused; Oppenheimer's Fadel Gheit says oil stocks are overpriced and are trading as if crude was going to stay at $110/bbl.
- "If they can hold onto Baghdad and the south of Iraq, 3M barrels will continue to flow and it won't be a big deal," said Again Capital analyst John Kilduff, while admitting that "any credible threat to central Baghdad or the oil fields - it's $150 just for starters."
- ETFs: USO, OIL, XLE, UCO, ERX, VDE, OIH, SCO, ERY, FCG, XOP, DIG, DTO, BNO, DBO, GASL, DUG, IYE, IEO, CRUD, GASX, PXE, USL, PXJ, UWTI, DWTI, DNO, FENY, RYE, SZO, FXN, OLO, DDG, OLEM, TWTI