How to profit from higher oil prices
The escalation of conflict in the Middle East sent the oil price soaring. Oil majors like BP are benefitting.
The price of oil has been higher since the start of March, as a result of the war in the Middle East and the effective closure of the critical Strait of Hormuz, through which around 20% of the world’s oil passes.
When oil prices rise, some of your other investments are likely to fall.
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Given most of the world’s industry relies on oil and gas as inputs, higher oil prices have caused chaos in most stock markets and economies. The Korea Exchange (KRX) had to implement a circuit breaker on 4 March as the country’s stocks shed 12% in a single day.
But high oil prices aren’t bad news for everyone. Some companies – the obvious examples being oil and energy companies – can stand to profit from higher oil prices.
British oil major BP (LON:BP.), for example, reported on 28 April that its underlying replacement cost profit (a measure commonly used by oil and gas companies that factors out inventory gains and losses) more than doubled to $3.2 billion in the year to Q1 2026.
BP’s profit jump was boosted by higher prices, according to Mark Crouch, market analyst at investment platform eToro.
“In many respects, BP has both absorbed and benefited from the same geopolitical tensions, with volatility once again proving a tailwind for an integrated major,” said Crouch.
Is there any way to profit from oil and energy price rises, and compensate for all the increased cost rising energy bills and petrol prices bring?
How have investors responded to rising oil prices?
Research from investment platform Charles Stanley Direct suggests that DIY investors’ top stock picks for March could reflect investors’ desire to invest in stocks that outperform during oil crises.
The analysis showed 40% of DIY investors sought to increase their portfolio’s exposure to oil, while 43% of DIY investors wanted to increase their exposure to energy, following the outbreak of the conflict in the Middle East.
“Energy remains a cornerstone of the global economy, and when its cost jumps the effects spread quickly,” said Rob Morgan, chief investment analyst at Charles Stanley Direct.
Rising oil prices could, for example, push Ofgem’s energy price cap up by 10% in May.
“It’s no surprise that investors might wish to try to capture [increased oil and energy prices] in portfolios,” said Morgan.
The risks of investing in oil
Before going into how to invest in oil and energy you should remember that, as recent events have proven, oil prices are highly volatile.
“Investing [in oil and energy] via an exchange-traded product (ETF) that aims to follow the price can risk being whipsawed,” said Morgan.
Morgan also cautioned that many investors might already have reasonable oil exposure within their portfolios, if (for example) they hold assets tracking the FTSE 100 which includes several oil majors like Shell (LON:SHEL) and BP.
“It is important to avoid unwittingly doubling up on exposure,” said Morgan.
How to invest for higher oil prices
That said, it could make sense, depending on where else you are invested, to allocate a small part of your portfolio to focused oil investments in order to shield yourself from price shocks and the consequent inflation.
“Energy equities can protect a portfolio in certain inflationary scenarios but can also underperform for long stretches when the commodity cycle turns or policy shifts,” said Morgan. “This is why they should generally only be held in small quantities, for instance up to 5%.”
As well as holding oil price-friendly assets, it is also important to remain diversified.
“Diversification and explicit geopolitical hedges remain essential,” said Evelyn Partners’ Casali. “These include gold, hedge funds, inflation‑linked bonds, short‑duration sovereign bonds and energy equities.”
If you feel your portfolio could do with a barrel or two of extra oil price exposure, then there are several ways you can add it:
- Oil and energy stocks. You can invest in oil and energy stocks like Shell, BP or Harbour Energy (LON:HBR). These stocks gained 5.8%,19.8% and 12.5% respectively between 27 February and 27 April.
- ETFs. Opt for a fund or ETF that invests in oil and energy companies, offering diversified exposure to stocks like these. Some examples are the SPDR MSCI Europe Energy UCITS ETF (LON:ENGE), which tracks large- and medium-cap energy companies in Europe, and the iShares Oil and Gas Production UCITS ETF (LON:SPOG), which has a broader international footprint (nearly three quarters of holdings are based in the US and Canada, with most of the rest hailing from Australia, Japan and Norway).
- ETCs. Use an exchange-traded commodity (ETC) as a means of simply tracking the oil price. One example is WisdomTree WTI Crude Oil (LON:CRUP), which offers investors total return exposure to WTI Crude Oil futures contracts.
