The fighting hasn't stopped. So why have oil and energy stocks moved on?

Something doesn't add up in the oil market.

Despite an uneasy ceasefire between the US and Iran, shipping through the Strait of Hormuz remains heavily disrupted. Tanker insurance costs have soared, hundreds of vessels are still waiting to transit and throughput remains well below normal.

Yet Brent crude has fallen back to around US$70 a barrel and ASX energy stocks have given back most of their gains.

Atlas Funds Management's Hugh Dive and Datt Capital's Emanuel Datt think investors have become too complacent. While markets have largely priced in a lasting ceasefire, both believe they're overlooking a growing disconnect between physical and financial energy markets.

So who's right? And where should investors be looking?

The market is looking through today's disruption

For Dive, investors are focusing on the wrong part of the story.

"It is somewhat perplexing that oil prices are back to pre-war February levels, and that the energy companies' March share price gains have also been given up," he says.

While headlines have focused on tankers continuing to leave the Gulf, Dive argues the real issue is what happens next.

"What the market seems to be ignoring is that tankers are not returning through the Straits to pick up new cargos of hydrocarbons. Given the uncertainty and 800% increase in insurance costs, owners of these vessels are unwilling to re-enter the Gulf."

The shipping data tells the story.

"Since the US-Iran memorandum of understanding (MOU) was signed on 17 June, only 10 Iran-linked tankers have moved west through the Straits; conversely, 172 have exited."

"In energy terms, this looks like an emptying bath, implying an upcoming supply shortage as very few tankers return through the Straits to pick up additional cargoes in July and August."

Datt sees the same disconnect from a different angle.

"This short-term disconnect is due to the market pricing in an enduring ceasefire agreement between the US and Iran, despite strong fundamentals that underpin the prospect of future returns," he says.

He believes previously stranded barrels have temporarily boosted supply during a seasonally weaker period for demand, masking a much more constructive medium-term outlook.

"What the market is ignoring is the fact that strategic oil reserves have been reduced materially, making the upside risk of energy commodity prices due to another closure of the Strait potentially more explosive."

"This is augmented by the fact that seasonal restocking demand will commence in the next couple of months, making the medium-term outlook bullish for energy commodities."

What changes the narrative?

Both managers believe investors have become conditioned to fade geopolitical shocks.

Dive says repeated trade wars, tariff disputes and conflicts have made markets increasingly resistant to surprises.

"Many of these shocks were supposed to send the global economy into recession, but this hasn't happened," he says.

"Investors have become jaded and less concerned about headlines in the financial press of impending portfolio doom ... and have become more shock-tolerant."

He acknowledges several "hidden shock absorbers" have prevented another oil spike, including softer-than-expected global demand, strategic petroleum reserve releases, OPEC's spare production capacity and disciplined US shale producers.

But he believes those supports won't last forever.

"A more permanent re-rating in energy stocks will probably require a sustained shift in oil prices above US$100 per barrel," he says.

In Dive's view, that would likely require another prolonged and sizeable supply shock - whether that's an attack on a major Middle Eastern oil field, a strike on a loaded supertanker, countries rebuilding depleted strategic reserves or a collapse of the current ceasefire.

"In our assessment, the system is running on borrowed time, and oil prices above US$100 per barrel are likely in the latter half of 2026."

"This move will see energy stocks with operations outside the Middle East rerated, especially with the proposed Iranian toll and increased insurance adding an estimated US$3-US$4 per barrel of oil exiting the Strait."

Not everyone agrees.

Morgan Stanley recently lowered its Brent oil forecasts, expecting prices to settle back around US$70 over the coming quarters, while Macquarie is even more cautious, forecasting around US$65 in 2027 as flows through the Strait recover and global supply improves.

Datt's view sits somewhere between the two.

Like Dive, he believes investors are placing too much weight on today's ceasefire. But he doesn't think another geopolitical escalation is required.

"The catalyst here is time. We note that current European gas storage levels are analogous to 2021, when energy prices rose considerably into the end of the calendar year," Datt says.

"We believe the market is pricing that the conflict will not recommence; however, it is overly discounting the very evident seasonal demand uptick that is imminent."

He believes increasingly short-term markets are creating opportunities for active investors willing to look beyond the next headline.

How they're investing

Both managers believe the recent weakness has created opportunities, but they're expressing that view differently.

Atlas remains significantly overweight the energy sector, with Dive preferring Woodside (ASX: WDS) over Santos (ASX: STO).

"WDS and STO's assets are both a long way from the Straits of Hormuz, which should attract a geopolitical risk premium. Still, they don't," he says.

Dive believes international investors have recognised Woodside's assets before the local market, pointing to Japanese utilities investing US$2.28 billion in Scarborough LNG.

"Also, WDS's much-maligned Louisiana LNG looks to be a genius move."

"It seems that Australian investors undervalue these assets, while offshore investors take a longer-term view."

Atlas also owns Ampol (ASX: ALD), Whitehaven Coal (ASX: WHC) and Mineral Resources (ASX: MIN), giving the portfolio exposure across refining, coal and the battery materials supply chain.

Datt is also constructive, favouring Whitehaven Coal, New Hope (ASX: NHC) and Ampol (ASX: ALD).

"We believe that ASX energy stocks appear to be attractively priced for patient investors," he says.

He believes Whitehaven is now well positioned to harvest returns from the former BHP assets acquired over the past three years, while New Hope continues to stand out for its disciplined capital allocation and shareholder returns.

On Ampol, government support for Australia's sovereign refining capacity has materially reduced commercial risk, while stronger refinery economics should benefit shareholders over the long term.

"Pleasingly, the sector has matured in its approach to capital allocation and this will be beneficial for shareholders over time," Datt says.

Morgan Stanley has also become more constructive following the recent correction. 

Despite lowering its oil price forecasts, the broker upgraded Santos from equal-weight to overweight, Woodside from underweight to equal-weight, and Beach Energy (ASX: BPT) from underweight to equal-weight, arguing the recent sell-off has created more attractive entry points for investors.