Chesapeake Energy Corporation (NYSE: CHK) is having a strong start to the trading session this morning, gaining about 7% early on. With the stock running, many are looking for news, but you’ll be hard pressed to find any.
Nonetheless, there’s a very good reason for the gains. Here’s what’s going on:
CHK Stock Benefits From Geopolitical Tensions
While you won’t find any news from CHK, there’s a good reason that the stock is heading up. It has to do with mounting geopolitical tensions around the world, with Iran at the center of concerns.
Recently, news broke about Iran and their blatant disregard for a nuclear deal. In a recent announcement, the head of Iran’s nuclear program said that the country was now operating double the amount of advanced centrifuges than was previously known. This announcement puts Iran in clear violation of its atomic deal with world powers.
Iran made the announcement as the country marked its 40th anniversary of the 1979 United States Embassy takeover. The announcement means that Iran is now capable of producing enriched uranium 10 times as fast as the nuclear deal allows.
So, what does this have to do with CHK? It may seem as though the story has little to nothing to do with the company, but that notion couldn’t be further from the truth.
The reality is that Iran is one of the world’s largest oil producers. While sanctions keep much of this oil out of the West, the country’s production does play into global supply equations.
Moreover, Iran is at odds with Saudi Arabia and several middle eastern countries, where the bulk of global oil takes place. As Iran continues to show its strength, an increasing chance of further warfare is coming to light.
This ultimately threatens quite a bit of the global oil production, which could throw supply and demand in a new direction, sending the value of oil up. Since CHK is ultimately an oil and energy company, this is great news for the company.
Are More Gains Ahead?
With the gains today, there’s one big question on the minds of investors. Are there more gains ahead? In my view, the answer is yes. Here’s why:
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