Mizuho has turned more positive on parts of the U.S. oil and gas complex, saying recent geopolitical developments have produced what it views as a market mispricing that investors can exploit.
In a sector note, analyst Nitin Kumar set out the bank's view that a protracted Iran crisis will keep global crude prices elevated and that refining margins are poised to strengthen meaningfully as supply dynamics tighten.
“As we approach 90 days of the Iran conflict, and SOH closure, we don’t expect a normalization of crude supply until 1Q27,” Kumar wrote, adding that unprecedented inventory draws now imply a “-2.7 mmb/d undersupply in 2026.”
Against that backdrop, Mizuho increased its Brent crude price assumptions. The bank now models Brent at $91.55 per barrel for 2026 and $79.35 per barrel for 2027, representing roughly 25% and 6% upward adjustments to those years' forecasts respectively.
Although the energy sector has performed well year to date, Mizuho noted a recent pullback in oil and gas equities combined with elevated commodity prices creates an opening for active investors seeking outperformance. The firm argues valuations look out of alignment across large-cap, oil-focused producers and among natural-gas exploration and production companies, while opportunities in refining may be more selective.
Reflecting that view, Mizuho identified Devon Energy, EQT and Permian Resources as its Top Picks for the sector, and moved EQT into Top Pick status in the latest update.
The bank also enacted a set of rating changes. Phillips 66, Par Pacific Holdings and Gulfport Energy were upgraded to Outperform. Conversely, HF Sinclair and Kosmos Energy were downgraded.
Overall, Mizuho's note frames the ongoing conflict-related supply disruption and the resulting inventory depletion as central to its outlook, translating into higher crude expectations, the prospect of firmer refining margins, and selective stock-level opportunities within U.S. oil and gas equities.
Market context noted by the bank
- Prolonged Iran crisis expected to extend the period of tighter crude supply.
- Inventory draws consistent with a material undersupply in 2026.
- Revised Brent forecasts for 2026 and 2027 to $91.55 and $79.35 per barrel respectively.