Iran's internal divisions impact global energy flow; analysts suggest focusing on long-term energy demand trends

The Strait of Hormuz is open. The Strait of Hormuz is closed. That pretty much sums up the last 72 hours of news around Iran and the Middle East's most critical waterway.

President Trump confirmed late Tuesday that the Iranian government is "seriously fractured." He extended the Iran ceasefire but conceded that it may not be a cohesive force overseeing decision making.

Sources cited by the author have extensively reported that there are two or more parties claiming control over Iran. President Trump and his envoys are negotiating with one group, while the Ayatollah's faction and its Revolutionary Guard military force assert that they retain control. This explains why news about the ceasefire one day is followed by reports of ships being fired upon the next.

Sources add that it is not clear who exactly is truly "running" Iran. There may be multiple factions, each wanting the world to believe they are the ones calling the shots. Iran may be in for a long internal battle for control, with this ceasefire extension taking much longer than oil and stock markets expect.

JPMorgan analyst Natasha Kaneva notes that the oil supply picture has worsened. Since the start of the blockade, non-Iranian exports from the Persian Gulf have remained stable, but about 2 million barrels per day of Iranian exports have "collapsed to near zero." This stoppage of Iranian oil flows implies that a pre-blockade supply shortfall of about 14 million barrels per day "has likely widened to a 15-16mbd deficit," reflecting the fact that ship-tracking estimates are often revised.

Trying to figure out who's running Iran is almost as confusing as estimating the world's energy flow.

JPMorgan has its take. The U.S. Energy Information Administration (EIA) believes that 7.5 million barrels per day of oil per day were offline in March, and that could rise to over 9 million.

Citigroup is also attempting to plan for every scenario. The firm notes that if Strait of Hormuz oil flows stay problematic later into the spring, the total supply loss could be as much as 1.3 billion barrels. The Citi team, led by Max Layton and Francisco Martoccia, would then see Brent crude prices averaging around $110 this quarter before falling back to $80 in the fourth quarter. Citi leans optimistic, however, thinking that some kind of deal will be struck eventually.

Without a deal that opens up the Strait of Hormuz, the world will keep being short about 13 million to 15 million barrels per of oil per day.

Goldman Sachs analyst Neil Mehta advises that regardless of the ultimate outcome around Iran, investors need to focus on companies that will benefit from longer-term trends around energy demand and the growth of data centers and A.I. demand.

Mehta likes ConocoPhillips (COP) as one of his big-cap oil plays, seeing an estimated 21% total return over the next 12 months. The company is set to benefit from a boost in four big new projects, including the Willow endeavor in Alaska.

Investors should note that ConocoPhillips is an investor in QatarLNG, which was recently hit by strikes. Mehta is undeterred, referencing a CNBC interview where CEO Ryan Lance stated the damage wouldn't have a huge material impact on his results.

Goldman Sachs also has a buy rating on Chevron (CVX).

Pittsburgh-based EQT (EQT) is seen as a winner. The Goldman team has a $68 target on the natural gas giant, up from its current trading price. Mehta's team says EQT "stands out" among natural-gas focused producers.

In addition to fueling the energy buildout, producing and distributing power is crucial. With this in mind, the Goldman team also likes buy-rated Vistra (VST) and Quanta Services (PWR). Vistra stock has upside to any price move higher, and Quanta is exhibiting strong earnings growth.

In an interview, EQT CEO Toby Rice discussed U.S. energy independence, natural gas prices, and future demand.

Rice stated that U.S. energy independence has protected Americans from geopolitical shocks. He believes demand is building fast and supply discipline is real, which usually doesn't keep prices low for long.

He added that thanks to the shale revolution, the U.S. has discovered enough energy to increase production by an incremental 50% from today's levels, creating a 60 Bcf/d surplus. Capturing this opportunity depends on surface infrastructure development.

Regarding demand for data centers, Rice emphasized the importance of producing energy to lower American energy bills, win the AI race, and provide energy security to allies. He forecasts a 30-40% increase in natural gas demand, making the industry exciting as the U.S. translates energy independence into "energy dominance."

When asked about his first major move as Secretary of Energy, Rice said he would build on Chris Wright's work by increasing the scale of America's energy advantage globally, focusing on affordability and reliability. He would also address the global issue of energy access, aiming to make American energy a bigger part of the solution for billions lacking reliable power and lifting them out of poverty.