Woodside Energy Group Ltd (ASX: WDS) shares have surged 19% over the past month.
Woodside is a global energy company primarily involved in the exploration, development, production, and trading of oil and natural gas.
Its share price has been boosted lately due to rising geopolitical conflict in the Middle East.
Oil prices have lifted 14% over the past week to US$73.51 per barrel at the time of writing, as investors prepare for potential disruptions.
Last Friday, it was reported that Israel had launched a strike on Iran's nuclear facilities and senior military figures. Despite calls for de-escalation, both sides carried out multiple missile attacks over the weekend.
According to The Australian Financial Review, economists warn that further escalation of the war between Israel and Iran could trigger a financial market meltdown.
Investors remain concerned that Iran could close the Strait of Hormuz, a key shipping passage that transports around 20% of the world's oil. Peter Downes, Outlook Economics director and a former Treasury modeller, suggested the price of oil could potentially quadruple or even quintuple if this were to occur.
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Is there further upside for Woodside shares?
Fund manager Wilson Asset Management owns the ASX 200 energy stock in several of its listed investment companies (LICs), specifically WAM Leaders Ltd (ASX: WLE), WAM Income Maximiser Ltd (ASX: WMX), and Wilson Asset Management Leaders Fund.
In a note last week, the fund manager noted that Iran has previously threatened to close the Strait in response to regional conflict. Should they go through with this threat, Wilson Asset Management analysts predict a sustained disruption could push oil prices above US$100 per barrel.
The fund manager wrote:
Sustained higher oil prices are a tailwind for energy producers, including Woodside Energy which benefits from oil-linked contracts that lift revenue and expand profit margins. Woodside's share price increased 7.4% on Friday, supported by this favourable backdrop and the company's attractive dividend yield.
Woodside shares currently offer a dividend yield of 7.48%, which is very attractive for passive income-oriented investors.
Today, US President Trump called for the evacuation of Iran's capital amid escalating strikes. This suggests the conflict is far from resolved, which could drive the Woodside share price higher.
How has Woodside performed over 5 years?
Woodside shares have risen 17% over the past five years, underperforming the S&P/ASX 200 Index (ASX: XJO), which has risen 44%. However, Woodside's dividend yield is substantially above that of the ASX 200 average, making up for some of this underperformance.
