Santos Ltd (ASX: STO) shares closed at a fresh multi-year high of $8.70 on Monday afternoon.
The shares have slid around 1.5% in lunchtime trade today, to $8.60 a piece. But even after today's decline, they're still up 40% for the year-to-date and are 12% higher than a year ago.
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Why are Santos shares flying higher in 2026?
The ASX energy shares have jumped higher in 2026 off the back of ongoing conflict between the US and Iran. Volatility in the region has fuelled significant concerns about tighter global oil supply and rising prices.
Santos shares spiked in February and March, around the time news first broke that conflict had escalated between the two nations. The shares continued climbing in value as the war heated up.
They cooled again in June off the back of news that the two nations could soon reach a peace agreement, but strikes recently resumed, throwing the market back into chaos and creating a strong tailwind for Santos.
According to the latest update and data from Trading Economics, Saudi Arabia's East-West pipeline, which provides an alternative oil shipping route to the Strait of Hormuz, continues to remain shut following recent drone attacks.
Meanwhile, a meeting between Iran and the Gulf Arab states to discuss Hormuz has also been postponed.
The price of crude oil has now jumped to around US$103 per barrel at the time of writing, a 22% increase over the past months alone.
And it looks like prices could keep climbing higher still.
Investment bank Goldman Sachs said they think crude oil could rise above US$120 if production stays well below pre-conflict levels. The bank estimates average output next year could still be around 4 million barrels per day below pre-war levels.
If oil stays above US$100 a barrel, oil and gas giants like Santos could benefit from higher realised prices.
Santos' share price rally has also been supported by its strong half-year FY26 results announcement, which it posted last month.
The company reported a 2% year-on-year increase in sales revenue and a 1.7% increase in production volumes. The company also generated free cash flow from operations, driven by strong base business performance.
Can Santos shares keep climbing higher?
The oil and gas business is well placed to keep increasing its production in the coming reporting periods, which could help boost its earnings for FY27.
The experts are bullish about the outlook for Santos shares over the next 12 months, too.
Market Index data shows that all brokers have a strong buy rating on the stock. But after the latest rally, the $8.57 average target price is practically flat against the $8.60 target price at the time of writing.
Sentiment is also very positive on TradingView. Out of 15 analysts, 13 have a buy/strong buy rating on Santos shares. Meanwhile, one analyst rates it a hold, and one rates the energy share a sell.
The average $8.95 target price implies a potential 4% upside ahead, at the time of writing. But some expect the shares to jump around 25% to $10.68 within the next 12 months.
