Why Oil Prices Are High Despite Persian Gulf Supply Recovery

The oil paradox… energy zigs as tech zags… can the Fed look past $100 oil?… Louis Navellier says to invest in companies that get paid no matter where oil goes

The Persian Gulf is now exporting more oil than it did before the Iran war began.

Most investors assume the war has choked off the region’s oil, as it did for months. But according to the ship-tracking service Kpler, as reported by The Wall Street Journal last week, Middle East oil flows averaged more than 24 million barrels a day in the week through Oct. 18. That’s above the prewar level of 23.3 million barrels a day.

So, why are oil prices climbing?

On Friday, Brent crude surged to a six-month high, settling at $116.72 a barrel to secure its third straight weekly gain. Meanwhile, West Texas Intermediate crude followed the rally upward, pushing past the century mark to close at $103.27. As I write on Monday, both are only slightly lower.

Legendary investor Louis Navellier, editor of Growth Investor, flagged this disconnect in his Flash Alert last Thursday:

[E]nergy prices are very firm even though more ships are going through the Strait of Hormuz now than before the Iran war started.

Furthermore, the Persian Gulf is exporting more oil than before the war started. So why are oil prices so high?

Why more oil isn’t translating into cheaper oil

Louis’ answer starts with the Houthis, the Iran-backed rebel group in Yemen, which has sharply escalated its attacks on Saudi Arabia.

In recent weeks, Houthi missiles and drones have targeted Saudi oil facilities and repeatedly struck Riyadh’s main international airport. An Oct. 10 strike there killed 12 people and wounded more than 300.

Last Thursday, Brent hit a then-five-month high after another round of Houthi attacks inside the kingdom.

Here’s Louis:

So, as long as that’s going on, oil’s going to remain high.

The second piece of the puzzle is the cost of extracting the oil from the region. Iran can no longer stop the tankers, but it can make every trip dangerous and expensive. The WSJ tallied about 30 attacks on ships around the strait this month alone.

In the wake of these attacks, war-risk insurance has climbed to as much as 10% of a vessel’s value, up from less than 3%. And freight for a supertanker carrying Gulf crude to China hit a near-record $37.37 a barrel.

Here’s the WSJ quoting Natasha Kaneva, head of global commodities strategy at JPMorgan:

In April, the problem was a shortage of crude. In October, it is the cost of moving it.

There’s also a wildcard issue on the calendar…

The Financial Times reports that a planned Israeli offensive on Iran is on hold until after the Nov. 3 midterm elections. And there’s real anxiety around this – JPMorgan’s trading desk cited renewed Iran risk after the election as one reason why last Thursday turned into such a bloodbath for much of the AI trade.

So, what’s the takeaway from all this in your portfolio?

Simple – energy still deserves a place there.

Energy zigs when tech zags

Last Thursday was a good example of why Louis has been pounding the table on energy.

As we covered in the Digest, after Meta (META) earnings reignited worries about the staggering cost of the AI buildout, its stock fell about 7%, and the Nasdaq dropped 2.6% – its worst day since early June.

However, in the same session, oil jumped to that five-month high I noted a moment ago.

Here’s Louis from that same Flash Alert:

All my top stocks right now are energy. Shipping, refining – those are the top stocks, and we own a lot of them.

So, you need to have the energy stocks because they zig when the tech stocks zag, and that’s my main message.

The chart below shows how the sector has rewarded investors this year. As I write on Monday, the Energy Select Sector SPDR Fund (XLE) (in black) is up about 58%, well ahead of the 29% return for the Technology Select Sector SPDR Fund (XLK) (in green) and the S&P’s 12% gain (in orange).

Source: StockCharts.com

We’ve familiarized our Digest readers with both of Louis’ favorite corners of the oil patch here in recent weeks. On shipping, we noted in our Oct. 13 Digest that supertanker day rates on the Middle East-to-Asia route had soared from roughly $30,000 at the start of the year to $1.3 million.

One of Louis’ favorites is Okeanis Eco Tankers Corp. (ECO), up 86% since he added it to his Accelerated Profits Buy List on June 22.

On refining, we profiled HF Sinclair Corp. (DINO) back on Sept. 23. It’s a pure-play refiner that benefits from the global diesel shortage. Diesel still averages about $6.18 a gallon, near its record high of $6.53 set in late September.

Here’s Louis on why that shortage isn’t going away quickly:

You just can’t bomb the Russian refineries. You can’t attack the Saudi Arabian refineries and expect that diesel prices are going to drop. There is a supply chain problem.

As I write on Monday, Louis’ Growth Investor subscribers are up 92% in DINO in about four months.

Now, the same oil prices powering ECO and DINO are giving someone else a major headache this week…

Can the Fed look past $100 oil?

This coming Wednesday, the Federal Reserve announces its latest rate decision. Then, the very next morning, we get the September Personal Consumption Expenditures (PCE) report.

Normally, central banks “look through” an oil spike. The thinking is that a jump in energy prices is a one-time shock, not an ongoing inflationary process. So, hiking rates to fight it would do more harm than good.

But that logic only holds if the answer to three related questions is “no.”

First, will high oil prices last?

The futures market increasingly says yes. According to Axios, oil for delivery in January 2027 has climbed 17% since early September to more than $97 a barrel.

One reason for this is something Louis flagged a couple of weeks ago – global oil inventories have been drained during the war, and countries need to refill their stockpiles, which puts a floor under prices.

Here’s how he put it a couple of weeks ago:

So, crude oil prices aren’t likely to fall below $90 per barrel.

Sure enough, that floor has held with room to spare. Brent hasn’t closed below $100 all month.

Second, is energy spreading into everything else?

The early signs suggest this could be beginning. September’s core CPI, which strips out food and energy, rose 0.3%, topping the 0.2% economists expected. And airfares are the clearest example of fuel costs bleeding into core prices – they’re up 22.4% from a year ago. With many airlines’ cheaper fuel hedges nearing expiration, more increases may be coming.

Then there’s diesel, the same shortage powering DINO. KPMG calls it “the sleeper threat” because it raises the cost of moving nearly everything, with a lag.

Third, are Americans starting to expect higher inflation?

This is the one the Fed fears most, and it’s moving the wrong way. In the University of Michigan’s latest survey, long-run inflation expectations rose to 3.5%, well above their 2024 range of 2.8% to 3.2%.

Meanwhile, inflation has now run above the Fed’s 2% target for nearly six years. That leaves the Fed with little credibility for telling Americans this spike is temporary.

Put it together, and you can see why markets expect the Fed to hold on Wednesday but hike in December. As I write on Monday, the CME FedWatch Tool puts the odds of a hike this week at 9.4%, and the odds of at least a quarter-point raise in December at 81.5%.

Here’s Louis on the timing:

The one positive is that the Fed doesn’t like to raise interest rates ahead of an election.

The midterm elections will be held on Tuesday, November 3, just one week after the October FOMC meeting.

So, the Fed will most likely wait until December to hike rates again.

Fed Chair Kevin Warsh rarely tips his hand, so at his post-FOMC-meeting press conference, we’ll be listening for any hint of where he stands on those three questions.

Turning to Thursday, look past the headline PCE number, which will reflect lots of higher gasoline prices. Instead, watch core PCE, which Wall Street expects at about 3.1%. That number will show whether energy is spreading into the rest of the economy.

Who gets paid no matter where oil goes

Here’s the irony: the same stubborn energy prices that are the Fed’s problem are the reason energy deserves a place in your portfolio.

But which part of energy? If the fear premium fades, oil prices could pull back. If the futures market is right, they stay high.

The good thing is that we don’t have to guess correctly. One corner of the energy patch can win either way: the companies that get paid to move it.

Remember Kaneva from the WSJ article: the problem now is the cost of moving oil. And that cost is reshaping energy far beyond the Gulf.

Before the Iran war, only about 17% of non-Iranian crude leaving the Gulf bypassed Hormuz entirely, going through pipelines across Saudi Arabia and the UAE. According to Kpler, that percentage had jumped to about 40% in September.

The lesson for the world’s energy buyers is clear: avoid depending on a single chokepoint. And increasingly, that’s a boost for American energy.

According to the U.S. Energy Information Administration, the Hormuz disruption helped double U.S. LNG shipments to Asia in the first half of 2026. Overall, U.S. LNG exports topped 73 million tonnes in the first seven months of the year, up 23% from a year earlier.

This American energy boom is what has Louis’ attention now – and is shaping his energy recommendations

He believes the U.S. is becoming the place the rest of the world must come to for energy. He calls it “America’s IPO.” And one of his favorite ways to play it borrows the same logic behind the tanker boom: own the companies that get paid to move the energy.

He calls them the “toll roads.” These are four pipeline and infrastructure companies that collect fees as American energy flows to data centers, Gulf Coast export terminals and customers overseas. Those fees depend largely on how much energy moves, not what it sells for.

Louis lays out the full story, including his toll-road picks, in a new free presentation. Click here to watch it.

We’ll circle back on the Fed decision and the PCE report after we get the outcomes.

Have a good evening,

Jeff Remsburg