Shares of oil and gas major stocks ExxonMobil (XOM 3.89%), Chevron (CVX 3.39%), and ConocoPhillips (COP 4.23%) rallied on Thursday, up 3.8%, 3.4%, and 4.2%, respectively, as of 2 p.m. ET.

The cross-industry gains reflected higher oil prices, which were up 3.4% on the day to $64.60 per barrel at that time.

Oil prices have been on a downward trajectory amid the threat of tariffs and their effect on the global economy; however, last night, the Trump administration put fresh sanctions on Iran, as part of its negotiations with the country over its nuclear program. As Iran is a major oil and gas producer, new sanctions could cut off that supply and raise prices globally.

Going after Chinese importers and refiners of Iranian barrels

In a press release last night, the U.S. Department of the Treasury issued fresh sanctions geared toward arresting Iran's ability to export oil to fund its government and military proxies in the region.

The Treasury Department sanctioned Shandong Shengxing Chemical Co., a Chinese teapot refinery, as well as several "shadow vessels" that transport Iranian oil to that refinery. Moreover, the language in the sanctions order reflected a determination to cut off perhaps even more Iran export opportunities.

Iran is the fourth-largest producer in OPEC+ and the third-largest natural gas producer in the world. Therefore, any restrictions on Iranian oil and gas exports could limit global supply, raising oil and gas prices and allowing U.S.-based integrated giants to fill in the gaps left by Iran's missing barrels.

In addition to the new Iran sanctions, it was also reported that OPEC+ is working with Iraq and Kazakhstan to limit their oil output, as those countries had been pumping oil above their quotas set by the OPEC+ cartel. Finally, a weaker U.S. dollar since April 2 may also be playing a role in the rise in oil prices, as oil is priced in dollars, the world's reserve currency.

It was likely a combination of all these factors moving oil prices and therefore these stocks higher today, as none of these three oil and gas majors had much in the way of company-specific news.

Demand woes remain

Despite today's bounce, the near and medium-term outlook for oil prices doesn't seem very bullish. Amid the global uncertainty fueled by President Donald Trump's tariff war, the odds of a U.S. recession later this year have increased. That would be very bearish for oil demand. Chinese demand could also remain muted as that country is still mired in recessionary conditions, while the renewed back-and-forth trade war between the two countries could further limit China's economic growth this year.

The U.S. and China are two of the biggest consumers of oil and gas globally, so a drop-off in demand from these two countries at the same time could be especially bearish for oil and gas prices.

While oil and gas stocks may provide diversification and dividends to portfolios, investors probably shouldn't count on material stock price increases in the sector, at least in the near term. The main reason to remain bullish on oil and gas stocks would be if a geopolitical conflict with a major oil producer broke out, as the world saw in 2022, when Russia invaded Ukraine.

While a similar scenario could play out eventually, such as a war with Iran, today's negations and sanctions aspire to avoid that scenario. It's also possible a negotiation with Russia is reached to halt its ongoing war in Ukraine, which could bring more barrels back onto the world market.

Therefore, it seems like a stretch to anticipate material upside for these stocks in the near term. Investors should probably regard oil and gas stocks as instruments to hedge one's portfolio against war and supply shocks, and not much more, at least for now in 2025.