Broader markets continue to tumble as the Iran war has sent crude oil prices soaring over $100 a barrel. If energy prices sustain at these levels, it might spoil the fiscal and monetary policy math for many countries, and it won’t exactly be a “small price to pay” for the Iran war, as President Donald Trump has said. Meanwhile, barring some sectors, particularly oil producers, stocks have pretty much fallen left and right amid the meltdown.
Alphabet (GOOG) (GOOGL), which was the best-performing “Magnificent 7” stock last year, has fallen 14% from its 2026 highs and is down 4.4% for the year. In my previous article, I had noted that I did not find Alphabet stock a buy amid the software sell-off. With GOOG only extending its year-to-date drawdown, let’s explore whether the stock has now entered a “buy zone” after falling to near $300 price levels. But first, we'll analyze the ways that higher energy prices impact Alphabet.
What Do Higher Oil Prices Mean for GOOG Stock?
The direct impact of higher energy prices would be felt in the operating costs of Alphabet’s energy-guzzling data centers. However, the real blow could come from the domino effect of increased energy prices and, by extension, higher inflation on Alphabet’s earnings. The company derives the bulk of its revenues from its advertising business, whose fortunes are closely intertwined with economic activity.
If the war escalates and oil prices rise further, it would start impacting consumer and corporate spending and hurt the company’s ad business. Also, the cloud business might feel the heat if companies slash their spending.
A slowdown in earnings would be the last outcome Alphabet and U.S. tech giants would have wanted as they are aggressively spending on building artificial intelligence (AI) infrastructure. There are already fears of the spending spree being funded by debt, which might weaken Big Tech’s hitherto solid balance sheets.
For instance, Alphabet raised over $30 billion through bond sales last month, receiving outsized attention for the 100-year bond that it issued as part of the offering.
Is It Too Early to Buy the Dip in Alphabet Stock?
Meanwhile, I believe it is a bit too early to buy the dip in Alphabet stock. Firstly, the broader market might remain turbulent in the short term, given the evolving war in the Middle East. With the S&P 500 Index ($SPX) just about 4% lower than its record highs, I don’t believe that the Iran war risk is fully priced into the markets.
Secondly, from a valuation perspective, Alphabet still looks a bit stretched at a forward price-to-earnings multiple at 25.93x. For context, among its Magnificent 7 peers, only Amazon (AMZN), Apple (AAPL), and, of course, Tesla (TSLA) trade at a premium. Also, while other Big Tech companies are trading at a discount to their average three-year multiples, Alphabet is not only trading at a premium to its own historical valuations but that of its average S&P 500 Index constituent.
I do believe that Alphabet has earned its right to trade at higher valuations, but I find the current levels still a bit high for comfort, particularly given the volatile macro situation. I trimmed my positions in GOOG earlier this year, and while the stock has come off its 2026 highs, I still don’t find the levels as enticing enough to add more shares.
The stock is looking weak on the charts, too, as observed by our Senior Market Strategist. Sell-side analyst community thinks otherwise about GOOG stock, though, and it is rated as a “Strong Buy” from the 55 analysts tracked by Barchart. Its mean target price of $379.11 is 26% higher than last week’s closing price.
On the date of publication, Mohit Oberoi had a position in: GOOG , AAPL , AMZN , TSLA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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