Oil at $116 and Stocks Wobbling: Is Your Portfolio Quietly Betting on Cheap Energy?

October 2026

By Will Glyn

On Thursday 22nd October, Saudi Aramco ordered the evacuation of its headquarters in Dhahran as fighting between Saudi forces and the Yemen-based Houthis intensified. By Friday's close, Brent crude had settled at $116.72 a barrel, its highest settlement since 29th April.

Wall Street's reaction was split. The Dow Jones Industrial Average dropped 652.82 points, or 1.23%, while the energy sector rose to a record high and Exxon and Chevron both reached all-time highs. A single oil price produced opposite results inside one stock market, and I find that more useful than the headline number.

On days like this, my clients start with the oil price and quickly get to a practical question: what in my portfolio actually gains when oil jumps, and what suffers? For many portfolios the answer is “less than you would think”, while the household budget takes the full increase. In this piece I’ll look at how big the energy slice really is, how sectors have behaved in past shocks, and where your costs sit depending on where you live. I’ll finish with a short checklist for a diversification review.

What the 23rd October scoreboard shows

According to CNBC, the S&P 500 slipped 0.52% to 7,623.68 and the Nasdaq Composite lost 0.21%. The moves behind those figures were uneven. Dollar Tree and Dollar General were down around 5% in midday trading as higher diesel costs weighed on retail margins.

The detail that stood out to me came from a different corner. Uranium, nuclear and clean energy exchange-traded funds (ETFs) all fell to 52-week lows on the same day the oil majors hit records, so the word “energy” on a fund factsheet can cover very different holdings. A clean-energy theme and an oil-and-gas producer fund are different bets, and on that Friday they moved in opposite directions.

How much oil is in a typical equity portfolio

According to Schwab’s October sector review, energy has a weighting of 3.4% in the S&P 500. Technology is close to 40% of the index. A fund that tracks the S&P 500, or a global fund with a heavy US allocation, therefore holds very little that rises when oil does.

Here is an illustration rather than a client case. Say you hold £400,000 in a US large-company index fund. At 3.4%, the energy slice is £13,600. If those shares rose 20%, which is not far-fetched given that Schwab shows a trailing 12-month return of 39.2% for the sector, the slice gains £2,720. That is 0.68% of the whole portfolio (3.4% x 20%). The other 96.6% carries whatever higher fuel costs do to company margins and consumer spending.

There are two further wrinkles. The sector is concentrated: Schwab puts the weight of the three largest stocks at 54.4%, so a sector fund is closer to a bet on three companies than on energy as a whole. And much of the run has already happened. The same table shows a trailing six-month return of just 0.2% (to 25th September, before this week's rally), and Schwab notes that oil prices could revert lower if geopolitical stress in the Middle East fades. Buying at a record carries that risk.

What past oil shocks say about winners and losers

History does not give a single pattern. In the Motley Fool’s review of past episodes, stocks fell more than 40% in the 1973-1974 bear market, with the oil embargo cited as a major cause, and the S&P 500 fell about 20% in 1990 after Iraq’s invasion of Kuwait. The 1979 shock, which followed the Iranian Revolution, is the odd one out: crude more than doubled, yet US shares kept rising through the year. The fall came later, with the S&P 500 dropping about 17% in six weeks in early 1980.

Energy has been the top sector in only a few years. Novel Investor’s table of annual S&P 500 sector returns, which includes dividends, shows energy up 65.7% in 2022. Only one other sector made money that year: utilities, up 1.6%. Technology fell 28.2%, and the S&P 500 as a whole fell 18.1%. That was the year Russia invaded Ukraine and Brent, the global oil price benchmark, topped $120 a barrel. Technology has led in other years, such as 2023, when it returned 57.8%.

The caution comes from the other direction. One analysis on Investing.com argues that energy stocks often reverse sharply when the shock resolves, which makes them a tactical holding. Spikes can also fade quickly. A recent analysis of the Saudi attacks notes that after the 2019 Abqaiq and Khurais strikes Brent jumped as much as 19.5% intraday (closing the day up 14.6%), and most of the spike had faded within about two weeks. The same piece says the most recent independent evidence shows no confirmed loss of Saudi production or exports from the latest attacks, so the market is pricing the risk of disruption. My reading is that a modest, deliberate energy allocation can soften a shock, but it works less well as a reaction to a record headline.

What the pump says about your own costs

The cost side is easier to measure than the portfolio side. In the UAE, Special 95 petrol has risen from AED 2.58 a litre at the end of last year to AED 4.28, an increase of about 66%. A 60-litre fill that cost around AED 155 now costs AED 256.80. The Fuel Price Committee reviews retail prices at the close of each month, and the November prices are due around 31st October.

In Hong Kong, AFP reported in early October that petrol was about HK$34.60 a litre, a jump of 16.6% since late February, and noted that the city lacks its own refineries and imports its entire supply of automotive fuel. In Singapore, fuel rates first rose again on 14th September after two months unchanged, and major companies have raised prices in repeated rounds since. In Spain, the European Commission’s weekly Oil Bulletin of 19th October, as compiled by fuel-prices.eu, puts diesel at €1.889 and Euro 95 petrol at €1.780 a litre, taxes included.

Fuel is only the visible part. Electricity, flights home and imported food follow energy with a lag, and none of those bills appear on a portfolio statement.

Earning where oil matters versus spending where it is imported

The split I find most useful with clients is between two groups. The first earns and spends in the same oil-linked region, which describes many people I work with in the UAE and Saudi Arabia. Their salary, bonus, housing allowance and sometimes their employer’s fortunes depend on regional conditions. A week like this one shows that cuts both ways, because the region is also where the shock started. Many people assume living in the Gulf gives them a natural hedge against oil. I would treat it as a concentration to balance, especially if the portfolio also leans towards regional shares or property.

The second group lives somewhere that buys its energy from abroad, such as Hong Kong, or earns in one currency and spends in another. Their costs follow oil but their income does not. A retiree in Spain drawing a fixed income from a portfolio with no energy or real-asset ballast feels the cost side in full and has nothing on the other side of the ledger. Both groups need to look at the portfolio, but they are looking for different gaps.

A short checklist for a diversification review

When I review a portfolio with an energy shock in mind, these are the points I work through:

• Look-through energy weight — add up the oil and gas producers held across every fund, not only the one labelled energy, and compare the total with the roughly 3.4% Schwab reports for the S&P 500.
• Type of energy — separate oil and gas producers from clean energy and uranium holdings, which fell to 52-week lows on 23rd October.
• Concentration inside the slice — check whether one or two companies drive the whole allocation.
• Spending exposure — estimate what share of annual spending goes on fuel, utilities and travel, and in which currency.
• Income exposure — note where your salary, bonus or business sits in the energy cycle, and whether your investments lean the same way.
• Other ballast and a written rule — identify what else in the portfolio is built to hold up if energy stays expensive and shares fall, and set down a rebalancing trigger in advance so the decision is not made at a record high.

How We Can Help

At PWA, we are independent and not owned by a financial institution, and our planners work within a regulated IFA network with over £1 billion under management and 120+ offices worldwide. Here is where I can help with the points above:

• Existing investments — a look at what you already hold, including how much sits in energy, which sectors and which regions.
• Lump sum investments — if you have savings set aside, spreading them across regions, sectors and asset classes rather than adding to what you already own.
• Regular saving plans — ongoing contributions into a long-term plan that reflects the same diversification points.
• Currency exchange — for clients whose salary arrives in one currency while their spending sits in another.
• Access to 60+ financial institutions — a wide range of providers to build from, with no single provider’s product range setting the limits.

If you would like to see how your own portfolio is positioned for an oil shock, you can book a call with me.

Will is an Independent Financial Adviser with over a decade of experience helping expats make the most of their international status.