By Alex Kozul-Wright

Energy stocks have been surging, but for some the gains may soon be over. That's the view of one analyst at Benchmark, who downgraded three oil-and-gas companies Thursday despite higher energy prices linked to the war in Iran.

Diamondback Energy, Permian Resources, and Talos Energy were all downgraded to Hold from Buy by Benchmark's Subash Chandra.

Two of those -- Diamondback and Permian -- were due to valuation. Diamondback "has limited upside from these levels," he said. The stock has jumped 19% this year, as of early Thursday trading. "We see no reasons for caution other than valuation."

Permian has now exceeded Benchmark's price target of $14, Chandra said, noting that the stock -- up 36% in 2026 -- has outpaced the State Street Energy Select Sector exchange-traded fund, which has climbed 27% this year. It rose 2.7% to $19.01 early Thursday.

For Talos Energy, there were company specific reasons for the downgrades. Talos, he said, issued "softer-than-expected 2026 guidance despite a strong 2025." The company reported earnings at the end of last month.

Oil prices have surged in recent days as the Iran War has escalated. Brent crude futures are up 16% this week, while West Texas Intermediate futures are up 17%. increased by a whopping 15%, to $77.41 a barrel. European natural-gas prices, up 3% Thursday, have surged 58% this week.

Geopolitical shocks, like the war in Iran, can spark volatility through supply constraints and shifting investor sentiment. But without further energy price gains the sector's stocks could struggle to climb much higher.

Write to Alex Kozul-Wright at alexander.kozul-wright@barrons.com

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March 05, 2026 11:17 ET (16:17 GMT)

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