Woodside Energy Group Ltd (ASX: WDS) shares have fallen into the red in Tuesday lunchtime trade.
At the time of writing the Australian petrol exploration and production company's shares are down around 1% and are changing hands for $32.62 each.
But the increase barely dents the gains the shares have made recently. Even after today's dip, the shares are still 38% higher for the year-to-date and 35% higher than 12 months ago.
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Why are Woodside shares flying higher this year?
The oil and gas giant's shares have enjoyed an incredible rally throughout most of 2026 so far.
Conflict in the Middle East and the consequential major oil supply concerns and ongoing volatility have been a key driver so far this year.
Every time the US and Iran show new signs of reaching a potential agreement, volatility reignites in the region and markets are thrown back into chaos. The situation is highly volatile, and the movement of oil from the area will continue to be uncertain until a final resolution is reached.
Shipping disruptions and production cuts pushed crude oil prices to a multi-year high of around US$113 per barrel in April, according to Trading Economics data. While the price of oil softened in June and early July, it has now flown higher again, to around US$103 per barrel at the time of writing.
According to Trading Economics: "Saudi Arabia's East-West pipeline, which provides an alternative route to the Strait of Hormuz, remains shut following drone attacks, with no clear indication of when operations will resume. A diplomatic meeting between Iran and the Gulf Arab states to discuss the situation in Hormuz was also abruptly postponed."
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.
And what is bad news for markets is good news for ASX energy shares like Woodside. If oil stays above US$100 a barrel, Woodside could benefit from higher realised prices.
But it's not only geopolitical tensions which have driven the company's share price higher this year. Woodside has also posted strong results recently which has rallied even more investor attention.
What did the company report last month?
Woodside posted its first-half FY26 results in late-August, including a 13% increase in operating revenue, a 27% increase in NPAT, a 7% increase in underlying NPAT, and a huge increase in free cash flow to US$352 million.
The strong result saw management declare a fully-franked interim dividend of 57 US cents per share.
Woodside also reaffirmed its full-year FY26 production and capital expenditure guidance. The company expects to complete key projects, including Scarborough, Trion, and Louisiana LNG, in line with previously announced timelines.
Are Woodside shares a buy, sell or hold?
After the latest rally, it looks like the oil major's shares are now trading around (or even above) fair value.
Market Index data shows all brokers have a hold rating on Woodside shares. But the $28.51 average target price now implies a potential 12% downside ahead, at the time of writing.
TradingView data shows something similar. Out of 17 analysts, six have a buy/strong buy rating, eight have a hold rating, and three rate the stock as a sell.
But the average $33.25 target price implies a potential 2% upside, at the time of writing.
But the difference between the maximum and minimum target price is huge. Some forecast the shares to climb about 36% to $44.28 over the next 12 months. But others think Woodside shares have the potential to fall up to 22% to $25.44, at the time of writing.
