The energy sector should continue to outperform as oil prices are likely to remain higher for longer on geopolitical risk even without a major escalation in the Middle East, according to Citi. The investment bank upgraded energy to outperform, as the sector has one of the highest free clash flow yields — while recent price momentum has increased its attractiveness. The energy sector has gained 13% this year, outperforming the broader S & P 500 .
"Our commodity team see higher for longer oil given the geopolitical risk even as a severe escalation seems unlikely." The oil market has erased recent gains on Israel-Iran tensions after the bitter enemies backed away from a full-blown war following tit-for-tat strikes this month. But U.S. crude oil and global benchmark Brent are up about 14% and 12% this year, respectively, as the supply and demand balance has tightened.
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