The Woodside Energy Group Ltd (ASX: WDS) share price is charging higher again on Monday, rising 2.29% to $35.26.
That pushes the energy giant's gain to almost 50% in 2026, making it one of the standout performers on the ASX this year.
The latest move comes as oil prices continue to surge amid the escalating US-Israel and Iran conflict in the Middle East, with Brent crude climbing above US$116 a barrel and WTI moving past US$101.
With Woodside shares now trading near fresh highs, investors are now assessing how much upside remains in the stock. The key question is whether the recent surge in oil prices has already captured most of the near-term gains.
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Oil prices are doing the heavy lifting
The main driver behind Woodside's rally remains the rapid move in global energy prices.
Brent crude has climbed to its highest level since 2022 as the conflict broadens across the region and shipping risks around the Strait of Hormuz heat up.
Woodside is highly exposed to stronger realised prices across its LNG, condensate, and oil portfolio.
The company has also benefited from the restart of offshore workforce mobilisation at the Karratha gas plant following recent cyclone disruptions. With that issue easing, investor focus has returned to stronger commodity prices.
With Brent nearing US$120 and some analysts discussing even higher oil scenarios if the conflict continues, earnings forecasts across the energy sector are lifting.
That is continuing to support Woodside's share price.
The valuation question is becoming harder
The challenge for investors chasing the rally is that much of the near-term good news is now reflected in the price.
At $35.26, Woodside is trading well above the average analyst 12-month price target of around $29.11, though the high-end target still extends beyond $41.35.
That valuation gap is becoming harder to ignore.
It suggests the share price now depends more on oil staying high for longer than on Woodside's underlying production base.
Broker consensus also remains fairly balanced, with the broader market still sitting closer to a neutral or hold-style view despite several bullish calls.
While this does not automatically make the stock expensive, it does leave less room for disappointment if oil prices pull back.
Why investors still keep buying
Even with that valuation stretch, there are still clear reasons the stock continues attracting buyers.
Woodside offers strong cash flow sensitivity to crude prices, a large LNG growth pipeline through Scarborough and Trion, and a dividend yield that becomes increasingly attractive when commodity prices remain high.
The market also remains focused on large-scale energy producers that stand to benefit when supply risks increase.
Foolish Takeaway
The rise in Woodside's share price is being driven mainly by higher oil and gas prices, not just market excitement.
However, at current levels, investors are effectively betting that oil prices will stay high for some time.
With shares above broker targets and up nearly 50% this year, further gains will likely depend on oil prices continuing to rise.
