What Happened?
A number of stocks fell in the afternoon session after the U.S. and Iran signed an interim agreement that would waive sanctions on Tehran's oil and reopen the Strait of Hormuz.
WTI futures fell as much as 3.5% to an intraday low of $73.60, the lowest since March 2, the first trading day after the initial US-Israeli strikes on Iran, while Brent crude dropped 2% to $77.96. The catalyst was a 14-point memorandum of understanding signed by the US and Iran, which begins a 60-day negotiation period. This stripped away the geopolitical risk premium that had been the energy sector's most powerful tailwind for months.
Under its terms, Iran will allow toll-free passage through the Strait of Hormuz immediately, with full traffic capacity restored within 30 days. Roughly 20% of the world's seaborne oil and LNG transits the strait. Saudi tankers and LNG carriers were already departing the Gulf region as shipping activity began to normalize. Oil reached as high as $120 per barrel at the peak of the conflict and fell nearly 29% in a month. That collapse reflects markets pricing in the return of Iranian barrels to global supply, barrels that had been sanctioned out of the market, alongside the reopening of the world's most critical energy shipping lane.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Oilfield Services company Helmerich & Payne (NYSE: HP) fell 3.4%. Is now the time to buy Helmerich & Payne? Access our full analysis report here, it’s free.
- Mixed or Offshore Upstream E&P company SM Energy (NYSE: SM) fell 4.7%. Is now the time to buy SM Energy? Access our full analysis report here, it’s free.
Zooming In On SM Energy (SM)
SM Energy’s shares are very volatile and have had 27 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 9 days ago when the stock dropped 4.6% on the news that Trump said a US-Iran deal could come in "two or three days," pulling energy equities sharply lower as investors priced out the conflict premium.
That narrative collapsed at midday when US Central Command confirmed an American Apache helicopter had gone down near the coast of Oman, and Trump said the US "must respond" to what he described as an Iranian attack over the Strait of Hormuz. Rather than a clean reversal, the helicopter incident created deeper uncertainty for the sector.
Oil prices might have recovered some losses on re-escalation risk, but a potential US military response introduces physical infrastructure risk across the Gulf that is harder to price than a headline ceasefire. The sector's net decline reflected a day where the bullish and bearish cases cancelled each other out, leaving investors unwilling to commit either way.
SM Energy is up 39.4% since the beginning of the year, but at $26.68 per share, it is still trading 23.4% below its 52-week high of $34.81 from May 2026. Investors who bought $1,000 worth of SM Energy’s shares 5 years ago would now be looking at an investment worth $1,276.
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