Oil stocks are bound to rise as fears of an escalation in conflict between the US and Iran grow. Already oil prices have surged.

The killing of Irans top commander by a US airstrike, ordered by Donald Trump, is predictably having an impact on oil prices and strocks. Source:. REUTERS/Marco Bello/File Photo

Oil prices surge after US forces kill Iranian general, under Trumps orders.

Armed conflict between the US and Iran could destabilise oil supplies sending prices further up.

Three oil stocks already enjoy high analyst favorability ratings, giving them potential for more upside as tensions in the Middle East rise.

The killing of the Islamic Revolutionary Guards leader General Qasem Soleimani by US forces has oil prices surging. With the rise in oil prices, oil stocks are bound to follow in the same direction.

In the immediate aftermath of the top Iranian generals killing,oil prices roseby as much as 4% before paring back some of the gains. However, this is unlikely to be the end of the matter. Iran is expected to retaliate and this could affect oil supplies globally.

While Iran is not expected to go toe-to-toe in a war with the United States, it could strike atmajor oil-producing US allies in the Middle East. One possibility is backing attacks on oil infrastructure in the Persian Gulf and the rest of the Middle East, according to CNBC.

This could place a strain on crude supplies globally further sending prices up. Last year, Iran was blamed for drone attacks on oil processing facilities in Saudi Arabia. This action resulted in thedisruption of around 5% of global oil production. While it is not yet clear how Iran will retaliate, the scale of damage could be larger.

Additionally, Iraq, where the head of the elite Quds Force of the IRG was killed, could turn out to be the theater ofaction between the US and Iran. This could further disrupt oil supplies as Iraq is the second-largest producer of oil among OPEC countries.

Does this mean any oil stock is worth opening your wallet for? If analyst ratings are anything to go by, with the exception of one megacap oil stock, it is not the usual suspects such as Exxon Mobil (NYSE: XOM), and Royal Dutch Shell that you should be buying. Rather it is the lesser-known players who have more upside potential.

Here are the oil stocks that are worth your consideration:

Diamondback Energy Inc (NASDAQ: FANG) is mainly an upstream player with a market cap of 14.87 billion as of January 2nd. Currently, the stock of the Midland, Texas-headquartered firm boasts of33 BUY ratingsand no SELL rating from analysts.

The average stock price target is $123.36. With the stock currently at $92.65, that represents an opportunity for a 33% gain.

The oil stock has a P/E ratio of 13.38 making it relatively cheap when paired against energy giant Exxon Mobil. The latter commands a P/E ratio of 20.66.

Marathon Petroleum Corp (NYSE: MPC) is more of an integrated downstream player providing oil refining, marketing and transportation services. The Findlay, Ohio-based firm boasts a market cap of 40.2 billion. The stock currently boasts a total of 15 BUY ratings andzero SELL ratings.

The average stock price target of Marathon Petroleum Corp is $80.24. With the oil stock currently going for $61.91, this represents an upside opportunity of 29.6% if the expectations of the analysts materialize.

Yes, Wall Street analysts are recommending the lesser-known oil stocks but this is one exception. Compared to Diamondback and Marathon, Chevron Corporation (NYSE: CVX) which is valued at $229.61 billion, enjoys a market cap that is several times the two combined. Among analysts,16 have issued a BUY ratingon Chevron with no SELL rating.

The stock of the San Ramon, California-headquartered energy multinational closed Thursdays trading at $121.43. With the average stock price target being $136.13, there is a potential for a 12% gain. Chevrons P/E ratio is 17.41.

After words, numbers are my other love… mostly when they are going up and they have nothing to do with taxes or expenses. That makes green my favorite color and markets my main focus. Currently a resident of Nairobi, Kenya. Follow me on l m

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