Investors have experienced the market’s recent choppiness and are growing concerned the easy gains from low energy costs are evaporating. President Trump’s “drill baby drill” agenda delivered record U.S. crude oil production of 13.6 million barrels per day in 2025, up 3% or 350,000 barrels per day from 2024, according to the U.S. Energy Information Administration. That surge was supposed to keep commodity prices in check and give corporate margins room to breathe.
Yet Brent crude averaged $103 per barrel in March and is forecast to peak at $115 per barrel in the second quarter before easing. The tailwind that lifted broad stock valuations is fading faster than expected. Let’s break down why this shift matters for your portfolio right now.
The Promise of Energy Relief Under Trump
Trump’s second-term energy policies focused on regulatory certainty and expanded federal leasing. The Interior Dept. highlighted record offshore oil output of over 714 million barrels in 2025, letting investors price in lower input costs across sectors — from airlines to chemicals to manufacturing. Lower energy expenses translate directly to higher free cash flow and better earnings.
For years, energy costs acted like a silent profit booster. When they stayed tame, companies could expand margins without raising prices aggressively. That dynamic helped the S&P 500 deliver steady returns even when other growth drivers slowed. Simply put, cheap energy was the market’s biggest, most reliable tailwind.
Why the Tailwind Is Fading Now
While production hit records last year, the EIA now forecasts U.S. crude output will dip slightly to 13.5 million barrels per day in 2026 — about 100,000 barrels per day less than 2025. Geopolitical flare-ups in the Middle East, especially the Iran war, widened the Brent-West Texas Intermediate (WTI) spread to an average $12 per barrel in March and as high as $25 per barrel at one point. Jet fuel prices jumped from roughly $2.50 per gallon before February to an expected $4.30 per gallon in the June quarter.
That reversal turns the expected relief into a cost headwind. Granted, Trump’s team delivered on the supply side. That said, external shocks and the modest production pullback mean the commodity relief investors counted on is no longer materializing as planned.
Stocks Already Feeling the Squeeze
Delta Air Lines (NYSE:DAL) first-quarter earnings this week showed revenue of $14.2 billion and adjusted operating income of $652 million despite fuel costs already up $332 million year-over-year. For the June quarter, Delta expects more than $2 billion in additional fuel expense and now forecasts adjusted earnings of $1.00 to $1.50 per share — below the $1.41 Wall Street consensus.
The company slashed capacity growth and aims to recover only 40% to 50% of the higher costs through fares and fees. Delta’s stock has felt the pressure because fuel represents one of its largest variable costs. Investors watching its peers see the same pattern: higher energy prices eat directly into operating margins when relief fails to arrive.
Dow (NYSE:DOW) offers another clear example. Its fourth-quarter earnings earlier this year reported 2025 net sales of $40 billion, but the Hydrocarbons & Energy segment posted year-over-year sales declines driven by lower merchant olefins prices, even as energy sales rose. Third-quarter results showed operating EBIT down $461 million year-over-year to $180 million, partly offset by $400 million in cost savings.
Higher feedstock costs from elevated oil prices squeeze chemical producers like Dow unless they can fully pass them along. Delta and Dow sit on opposite ends of the energy spectrum, yet both illustrate the same point: when the broad cost relief fades, margins tighten, and valuations adjust.
Key Takeaway
In short, the energy tailwind that supported stock multiples is giving way to higher input costs and renewed margin pressure. Regardless of how you look at it, this regime shift favors companies with strong pricing power or energy hedges.
Ultimately, investors might want to reduce their exposure to high-energy users like airlines and chemicals if prices stay elevated above $100 per barrel. JPMorgan analysts have warned if the Iran conflict keeps the Strait of Hormuz effectively closed until mid-year, Brent crude could drive to $150 a barrel, causing major supply shocks.
Instead, look for hidden winners, such as tanker operator Frontline (NYSE:FRO), whose rates surge from the price spike and having to take longer routes away from the Strait. As the energy tailwind fades, it is more important than ever to be diversified so no single investment blows up your portfolio.
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