Why Investors Should Avoid Energy Stocks

The sudden jump in WTI crude prices after Israel attacked Iran’s nuclear facilities faded quickly. In the last week, prices gave up recent gains. Investors should consider avoiding the sector.Long term energy investors may continue to hold Exxon (XOM), Chevron (CVX), and ConocoPhilips (COP). However, those who did not start a position may want to wait for the volatility to ease. Fear that oil supply disruptions would raise prices lifted energy stocks. That is not a sustainable rally.Energy investors need crude prices to strengthen as demand rises. In the near term, odds are rising that the global economy will slow. The fluctuating tariffs, from a steep imposition to a pause, distorted demand. Shipping activity rose after suppliers exported goods before tariffs. They did so again when the U.S. paused tariffs.If the U.S. lifts the tariff pause, it would weaken the economy. Oil prices would fall in response.While the Middle east tensions eased earlier this week, that might change. A break of the seize fire would lift oil prices again.Starter PositionsInvestors should watch the out-of-favor energy firms. Watch companies including Occidental Petroleum (OXY), Devon Energy (DVN), and Canadian Natural Resources (CNI). On Tuesday, OXY stock fell by 3.34%. Exxon stock fell by 3%.