Shares of Shell PLC (SHEL) climbed 1.22% to $66.76 on Tuesday morning, riding the wave of escalating tensions in the Middle East. The assassination of Hezbollah leader Hassan Nasrallah by Israeli forces in Beirut has sparked a volatile situation, with reports suggesting Iran may be planning a ballistic missile attack on Israel in retaliation. This potential conflict has prompted the U.S. to ramp up its military presence in the region, raising concerns about disruptions to global oil supplies.
The news of potential conflict has sent shockwaves through financial markets. Oil and gold prices have surged, while major stock indexes like the S&P 500 and Dow Jones have experienced drops in response. The significant increase in U.S. military presence, including the deployment of fighter squadrons and naval forces, has heightened fears of supply chain disruptions, particularly in the Strait of Hormuz, a vital passage for global oil shipments. This scenario presents both risks and opportunities for energy giants like Shell.
The Middle East, home to over 30% of the world’s oil production, is a region of strategic importance for Shell, one of the world’s leading oil and gas companies. Any instability in this region, especially in oil-rich areas like the Arabian Gulf, can have immediate consequences for oil markets.
Shell’s integrated energy portfolio, which encompasses upstream exploration, production, refining, and trading of oil and natural gas, is highly sensitive to fluctuations in global oil prices. During times of geopolitical conflict, supply chains often face disruption, leading to price spikes, which typically benefit major oil producers like Shell.
Traders and investors are betting on higher oil prices as the geopolitical situation intensifies. This potential price surge could directly boost Shell’s profit margins in its upstream oil production business. Investors can gain exposure to Shell through the Energy Select Sector SPDR Fund (XLE).
Is SHEL a Good Stock to Buy?
Determining whether a stock is a good buy requires careful consideration of various factors. While valuation metrics and price action, readily available on platforms like Benzinga, are important, investors should also evaluate aspects like dividend payments and share buyback programs.
Shell currently pays a dividend, yielding 4.02% per year based on the closing price on October 1, 2024. The company’s dividend payouts provide a consistent stream of income for investors. Additionally, share buyback programs, where companies repurchase their own shares, can serve as a support for share prices, acting as a backstop for demand. While Shell’s recent buyback program status may need to be investigated through the latest news, it’s a factor worth considering.
Ultimately, whether SHEL is a good stock to buy depends on individual investment goals and risk tolerance. Investors should conduct thorough research, considering factors such as market trends, company performance, and potential risks before making any investment decisions.
