With Hormuz closed, is there an opening to buy Woodside shares?

Well, it seems we are back to square one in the Strait of Hormuz. The fragile ceasefire between the United States and Iran apparently collapsed over the weekend. The United States has resumed strikes on Iran, while Iran has announced that, once again, ships are not permitted to transit the Strait of Hormuz. Does this mean investors should look to ASX energy shares like Woodside Energy Group Ltd (ASX: WDS)?

Yes, we seem to be in a new phase of crisis when it comes to this all-important, and now universally recognised global chokepoint. With ships unable to transit the Strait, markets have turned bearish. The S&P/ASX 200 Index (ASX: XJO) is lower today, currently down by about 0.4%. But naturally, ASX energy shares like Woodside are going the other way. Woodside itself is currently up 0.3% in today’s session to $29.14 a share. Since last Tuesday, this stock, the largest oil and gas producer on the ASX, has lifted by a confident 4.15%.

Although not quite as high as the near-$36 levels we were seeing back in April, Woodside is still up by more than 23% in 2026 to date. Over the past 12 months, investors have enjoyed a 21% return.

Despite these impressive gains, Wodoside shares are still trading on an eye-catching dividend yield of 5.67% at present.

So, with global oil prices spiking once again, and a yield of that size on the table, are Woodside shares currently in the buy zone?

Woodside shares: Time to buy?

I think anyone debating this question is missing the forest for the trees. In Warren Buffett’s view of investing, which I share, good investing practice involves buying high-quality companies that have the ability to compound their earnings over many years at cheap prices.

I think Woodside falls short on a few of those criteria. Firstly, Woodside shares are becoming more expensive, not cheaper, as a result of recent events. That’s not a buy signal in my book.

Secondly, the latest developments in the Middle East are small chapters in what is becoming a very long book indeed. Yes, the Strait is back to being closed. But no one knows if it will reopen tomorrow, next week, or next year. Buying an energy stock based on a view of when a future event may occur is getting dangerously close to flipping a coin. A gamble is, or at least should be, a very different proposition from an investment decision.

Thirdly, it’s my view that most energy shares are not high-quality compounders. Their profits are largely out of their control, riding or dying on the back of fickle global energy prices. This can be great when prices are high. But it can also lead to a prolonged drought if energy prices remain subdued.

So no, I don’t think Woodside shares are attractive following the events of the weekend. In my view, there are simply too many unknowns to make an informed investment decision given the current circumstances.

The post With Hormuz closed, is there an opening to buy Woodside shares? appeared first on The Motley Fool Australia.

More reading

• Is the Woodside share price a buy for its 14% dividend yield?
• 5 things to watch on the ASX 200 on Monday
• ASX 200 energy shares rebound after US-Iran peace deal falls apart
• How much do I need in my superannuation to get $50k per year in passive income?
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.