How to pick the best oil stocks

Considering the 2026 global oil market, the top story is very clearly the Strait of Hormuz crisis.

Following joint US-Israeli military strikes on Iran in late February 2026. which included the killing of Supreme Leader Ali Khamenei, Iran's Islamic Revolutionary Guard Corps has issued warnings prohibiting vessel passage through the strait, leading to an effective near-halt in shipping traffic.

The consequences for global energy markets have been severe. The disruption has affected approximately 20% of the world's daily oil supply and significant volumes of liquefied natural gas. Oil has once again breached $100 per barrel, and economists have warned of a moderate-to-substantial stagflationary drag on the US economy, with Europe and East Asia facing potentially sharper impacts.

In a more extreme scenario, Oxford Economics has modelled oil averaging $140 a barrel, a potential ‘breaking point’ that could push the Eurozone, UK and Japan into economic contraction.

The Strait of Hormuz is located between Oman and Iran, and is one of the world's most critical oil chokepoints. In 2024, oil flow through the strait averaged 20 million barrels per day, equivalent to about 20% of global petroleum liquids consumption. Very few alternative options exist to move oil out of the region if it’s closed, and more than $500 billion in oil and gas flows through the waterway every year.

For investors considering oil stocks, the 2026 disruption is a stark reminder of both the upside potential and the volatility inherent to the sector.

Best oil stocks to watch

While ‘best’ is subjective, oil stocks broadly fall into two categories — the largest companies by market capitalisation, which tend to offer stability and income, and faster-growing companies that offer higher upside (but with higher risk).

Each approach has its own merits depending on your investment goals and risk tolerance, and many investors prefer to invest in a variety to reduce their risk profile through diversificaiton.

Largest oil stocks by market capitalisation

Saudi Aramco (2222.SR)

The world's largest oil company by market cap, Saudi Aramco is the backbone of the global energy supply. State-controlled and based in Dhahran, Saudi Arabia, it produces more crude oil than any other single company on earth.

Its scale, low production costs and government backing make it uniquely resilient to oil price downturns. However, close ties to the Saudi state and OPEC policy mean investors have limited influence and are exposed to political decisions as much as market dynamics.

ExxonMobil (XOM)

One of the most recognisable names in global energy, ExxonMobil operates across the entire value chain, from exploration and production to refining and petrochemicals.

The company has delivered sector-leading shareholder returns in recent years, including tens of billions of dollars in distributions last year and decades of consecutive years of dividend growth. Its ambition to grow earnings and cash flow substantially through the end of the 2030, even without higher oil prices, makes it a stalwart for income-focused investors.

Chevron (CVX)

A global energy titan active in 180 countries, Chevron also operates across every stage of the oil and gas value chain. Chevron expects to grow its free cash flow at a rate of more than 10% annually through 2030, fuelled by major capital project completions. It also returned tens of billions to investors last year and has grown its dividend for nearly 40 consecutive years. Its exposure to growth regions, including Guyana, adds a longer-term dimension to an already well-known income story.

PetroChina (0857.HK)

The listed arm of China National Petroleum Corporation, PetroChina is the dominant force in Chinese oil and gas. It operates across exploration, refining, pipeline infrastructure and marketing.

As China's energy demand continues to grow, PetroChina is benefitting from both domestic consumption and state-backed investment. However, investors should be mindful of the regulatory and geopolitical risk given its close relationship with the Chinese government.

Shell (SHEL)

The larger of the FTSE 100’s two majors, Shell operates one of the most internationally diversified energy businesses in the world, spanning upstream oil and gas, LNG, chemicals and a growing low-carbon energy portfolio.

Shell has faced sustained pressure over its climate strategy, but its strong operational cash flows, share buyback programme and international scale keep it among the most liquid and widely held oil stocks for UK investors.

How to start trading or investing in oil stocks with us

So how do you go about buying oil stocks? There are many different ways to invest or trade in oil with us, depending on the products available in your region.

You might want to buy shares in companies like BP or Shell directly, trade futures and options on leverage using spread bets or CFDs, or trade oil using a commodity-based ETF.

Indeed, many investors choose a diversified oil ETF like the Energy Select SPDR Fund to diversify into multiple S&P 500 oil producers. We also offer fully managed IG Smart Portfolios, with competitive fees and full historical transparency.

But to get started:

How to invest in oil stocks with us

1. Create an account or login
2. Research and select your oil stock opportunity
3. Select 'buy' in the deal ticket (you can only go long when investing)
4. Choose the number of shares you want to buy and take steps to manage your risk
5. Open and monitor your position

How to trade oil stocks with us

1. Create an account or login
2. Choose between spread bets and CFDs and research for your oil opportunity
3. Select 'buy' to go long or 'sell' to go short
4. Set your position size and take steps to manage your risk.
5. Open and monitor your position

Remember, trading with spread betting or CFDs comes with added risk attached to leverage. Your position will be opened at a fraction of the value of the total position size – meaning you can gain or lose money much faster than you might expect. You'll also want to keep in mind that past performance isn't a guarantee of future returns.

If you're new to investing or to our platform, why not try our demo account to practise and build your confidence?

Growth oil stocks to watch

These stocks have been selected for their market popularity and growth potential.

Devon Energy (DVN)

Devon is a US-focused exploration and production company with operations across multiple low-cost oil basins. Its fixed-plus-variable dividend framework pays out a significant portion of excess cash flow each quarter, rewarding investors during periods of high prices.

In February 2026, Devon struck a $21.5 billion all-stock deal to acquire Coterra Energy, making it one of the largest oil and gas producers in the country. The merger significantly expands its acreage and production profile, positioning it as a major growth play in US shale.

Ovintiv (OVV)

Ovintiv has concentrated its operations in the Permian and Montney basins, two of the most prolific, low-cost oil basins in North America, following the acquisition of NuVista Energy and the divestiture of non-core assets.

The company has pledged to return at least 75% of its 2026 free cash flow to shareholders through dividends and a new $3 billion share buyback programme. Its operational efficiency and focus on capital returns make it a popular option for investors seeking growth with a shareholder-friendly capital allocation policy.

Cenovus Energy (CVE)

The Canadian integrated energy company operates long-life oil sands assets alongside downstream refining capacity across Canada and the United States. Its projects are designed to work at lower oil prices, supporting steady cash generation, and strong free cash flow has allowed Cenovus to grow dividends consistently and return excess cash through share buybacks.

For investors seeking exposure to Canadian oil sands growth at a reasonable valuation, Cenovus remains a well-regarded option.

Cheniere Energy (LNG)

Positioned between North American natural gas producers and global LNG consumers, Cheniere has built a uniquely durable business model. Approximately 90% of all volumes it produces are linked to long-term purchase agreements, many lasting two decades, providing high confidence in cash generation.

Expansion projects at its Corpus Christi facilities are currently under construction and expected to come fully online in 2026, with further expansions planned through 2029. With global LNG demand rising and supply chains being rewired in the wake of the Hormuz crisis, Cheniere's infrastructure is increasingly strategically valuable.

Enbridge (ENB)

Enbridge operates one of the largest oil pipeline systems in the world, transporting 30% of the oil produced in North America, alongside an extensive natural gas pipeline system and growing renewable energy operations. Its pipeline network generates stable, fee-based cash flows backed by long-term contracts, providing a degree of insulation from oil price volatility.

For investors who want exposure to energy infrastructure growth rather than commodity price risk, Enbridge is a popular choice in the sector.

What affects the price of oil and oil stocks?

Oil is the energy source of the global economy, and there are hundreds of warring factors driving its price up or down at any one time. Specialised oil commodity traders spend their entire professional lives attempting to understand where oil may go next. In short, predicting oil price movements is exceptionally complex.

However, the key elements to consider are:

• Global demand and supply – this is economics 101, but it needs to be said. All being equal, decreases in demand and increases in supply will reduce the oil price, while the opposite is also true.
• Geopolitical problems – political instability and war in major oil-producing countries can hugely impact the demand and supply of oil. Political tensions in the Middle East, including the 2026 Hormuz crisis, are a vivid example of how quickly oil can be affected. Others include the COVID-19 pandemic and the Russia–Saudi price war.
• OPEC policy-making – the Organisation of the Petroleum Exporting Countries is a powerful cartel that controls circa 75% of the world's crude oil reserves and 42% of global crude oil output. It can coarsely affect oil prices by imposing production cuts or increases.
• Economic growth cycles – the capitalist system lends itself to cycles of boom and bust, whereby oil increases in price when demand is high in the boom periods and falls during the bust. A component of this phenomenon is inflation, whereby high oil prices feed higher inflation, which then sees consumer purchasing power fall, reducing oil prices.
• Natural disasters – earthquakes, hurricanes and floods can unpredictably devastate the oil supply of a major producer. A good example is Hurricane Katrina in 2005, which led to a price spike when oil production in the Gulf of Mexico temporarily collapsed.

It's worth noting that trading or investing in oil stocks adds another layer of research and complexity.

Advantages of oil stocks

As oil is so closely tied to the global economy, there are many reasons to invest or trade in the best oil stocks. The most important are:

• Diversification – oil stocks, and particularly oil ETFs, are usually an excellent addition to a diversified portfolio. This is because they are rarely strongly correlated with other traditional assets, such as bonds or real estate, which reduces risk.
• Income generation – the larger oil companies almost always pay out dividends, which can be particularly attractive to pensioners looking for steady income and tech-sector investors looking to diversify their risk base.
• Growth opportunities – while the price of oil continues to fluctuate, global energy demands are continuing to increase with development and population growth. Further, new oil discoveries and drilling advances can act as oil stock catalysts.
• Trading volatility – seismic, geopolitical and natural disaster events can have significant short-term impacts on supply and demand, creating opportunities for traders to profit from the accompanying fluctuations in oil prices.
• Inflationary hedge – like the US dollar and gold, oil is a common hedge against inflation. Higher inflation is typically driven by high oil prices, which usually sees oil company profits rise alongside their share prices.

Risks of oil stocks

As with all strategies, there are risks associated with investing or trading in oil stocks. These include:

• Price volatility – unsurprisingly, the oil industry is highly sensitive to fluctuating oil prices, which can cause oil stock prices to move erratically. The supply glut in 2014–15, the COVID-19 pandemic and the 2026 Hormuz crisis all demonstrate how fast and severe oil price moves can be.
• Beta volatility – the 'beta' (or volatility compared to the wider market) is often much higher than the FTSE 100 or S&P 500. This can create trading opportunities, but volatility is often a double-edged sword. Increased volatility can offer the opportunity to generate faster profits, but conversely means you can lose money quickly if the market turns against you.
• Dividend risk – most oil companies pay regular dividends to investors. However, falling oil prices can make it impossible to pay out the expected dividend. A good example is Seadrill, which suffered more than average during the 2014–15 glut.
• Oil spills – accidents happen when drilling, but they cannot be accurately predicted and their outcome on stock price is fickle. BP's Deepwater Horizon fiasco saw the stock fall by over 50%, while Exxon fell by less than 5% after the Valdez spill in 1989.
• Regulation – high oil prices tend to generate windfall taxes, which means there is a lid on profits and usually no support when oil prices fall. This effect can be damaging for both investment and oil stock prices, as these taxes often stay in place long after oil prices have fallen back to more reasonable levels.
• Geopolitical disruption – as the 2026 Hormuz crisis illustrates, conflicts in or near major oil transit chokepoints can cause violent and rapid price swings. While this may benefit some oil producers in the short term, broader economic damage — including inflation and recession fears — can weigh on equity markets as a whole.