Morgan Stanley Sees More Gains Ahead for Europe’s Energy Stocks

Europe’s energy sector has room to extend its outperformance versus the broader market as investors are only beginning to price in a structural shift in supply risks amid war in the Middle East, according to analysts at Morgan Stanley.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Europe’s energy sector has room to extend its outperformance versus the broader market as investors are only beginning to price in a structural shift in supply risks amid war in the Middle East, according to analysts at Morgan Stanley. Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.Analysts led by Martijn Rats upgraded their stance on the sector to attractive from in-line. They said that while oil and gas price shocks stir inflation, tend to push interest rates higher and are a headwind for economic growth and equities in general, they benefit energy stocks.That divergence has been visible since the start of war in Iran, with the Stoxx 600 down 8.6% while its energy sector sub-index has advanced 10% since the end of February. Morgan Stanley analysts, while cautioning that the move carries downside risks after the rally, see the macro backdrop continuing to favor the sector over other parts of the market.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.“The recent relative rally still has further to run,” the analysts wrote. “The market is only beginning to price a lasting change in energy security, effective spare capacity and the value of secure supply.”Morgan Stanley analysts upgraded BP Plc and Repsol SA to overweight, citing their stronger leverage to a higher-for-longer oil and gas environment and improved scope for shareholder returns as cash flows rise. They turned more cautious on more defensive stocks, with Shell Plc downgraded to equal-weight, reflecting more limited upside in a rising price environment.—With assistance from James Cone.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.365 Bloor Street East, Toronto, Ontario, M4W 3L4© 2026 Financial Post, a division of Postmedia Network Inc. All rights reserved. Unauthorized distribution, transmission or republication strictly prohibited.This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.You can manage saved articles in your account.and save up to 100 articles!You can manage your saved articles in your account and clicking the X located at the bottom right of the article.