When to Sell ASX Oil Stocks in a Geopolitical Spike

When to Take Profits as Crude Rallies

Cyclical stocks like oil can be some of the hardest to time, especially when prices are being driven by geopolitical shocks rather than normal supply and demand.

When tensions flare, the market can move fast, and trying to pick the exact top or bottom becomes extremely difficult.

If we look at oil and gas specifically, events tied to Iran have once again put a spotlight on the Strait of Hormuz, one of the most important trade routes in the world.

In 2024, the strait handled an average of 20 million barrels of oil per day, which is about 20% of global oil consumption. That is why it matters so much. This is not just another shipping lane. It is one of the world’s most critical chokepoints.

And this is where the broader market impact starts to become clear. Asia is heavily exposed to Middle Eastern energy flows, which is why any disruption here can hit sentiment across the region very quickly.

We have already seen that pressure show up in South Korea, with the market tumbling as investors start pricing in the risk of tighter energy supply, higher costs, and weaker trade conditions.

Asian countries collectively receive 89% of the crude oil that passes through the Strait of Hormuz, while China alone receives 37% of all oil imports moving through the strait. That gives you a sense of just how important this route is to global trade.

So when this chokepoint comes under pressure, it does not just affect oil prices. It sends shockwaves through equities, trade flows, inflation expectations, and broader global risk sentiment.

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What we have seen so far is oil prices pushing up to around $76, and a lot of analysts are now pointing to a possible move into the $80 to $90 range.

History shows these spikes can be sharp, but they can also be short-lived. If the damage to trade infrastructure remains limited, there is a real chance flows through the Strait of Hormuz recover sooner rather than later. But that really depends on one thing: whether this conflict stays brief.

If it drags on, the risk changes quickly. That is why some forecasts have started to point to a much more extreme upside scenario, with prices potentially pushing as high as $120 if the war stretches beyond a few weeks. We still see that as more of a tail-risk outcome than the base case, but it is not something the market can ignore.

We own oil and gas stocks in our portfolio, and our plan is to scale out at different points if oil moves toward $80 over the next three weeks.

We are not trying to perfectly time the market or pretend we can pick the exact top. But when cyclical names have already delivered strong returns, that is usually when we start thinking more seriously about taking money off the table.

That is especially true when those gains are in the 50% to 70% range. At that point, the easy money is often already behind you, and discipline matters more than squeezing out the last move.

When Cyclicals Run

The 2022 Russia-Ukraine crisis is a good reminder of how this usually plays out. Oil surged above $110 per barrel, and major producers like ExxonMobil and Chevron saw profits explode higher. Exxon’s share price climbed roughly 80% in 2022 as energy markets tightened and investors rushed into the sector.

But the key difference this time is duration. That war became a long-running conflict, and even with that backdrop, oil prices eventually came well off their highs. That is why we think the length of this conflict matters just as much as the initial shock.

If this is short and contained, the spike could fade faster than people expect. If it drags on, the upside in oil could be much bigger, but so could the volatility.