Oil prices surge after US forces kill Iranian general, under Trump’s 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 general’s killing, oil prices rose by 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.

Is there a reason to buy oil stocks now?

While Iran is not expected to go toe-to-toe in a war with the United States, it could strike at major 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 the disruption 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” of action 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

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 of 33 BUY ratings and 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

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 and zero 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.

Chevron Corporation oil stock

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 rating on Chevron with no SELL rating.

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