Shares of industries with high fuel costs like airlines and cruise lines dropped Monday as crude oil and gasoline futures spiked following the weekend attack on Saudi oil installations. Shares of retailers fell on fears that higher gasoline costs will hurt sales and squeeze profits.
Oil prices are soaring after the drone attacks forced Saudi Arabia to cut its oil output in half. Brent crude futures, the international benchmark, rose as much as 19.5% to $71.95 per barrel and U.S. West Texas Intermediate futures climbed as much as 15.5% to $63.34. U.S. gasoline futures surged more than 9%.
The attacks mark the largest disruption to the world oil supply in history, knocking out about 5.7 million barrels per day.
Evercore ISI said a spike in oil prices could "require a reset of revenue expectations" for airlines.
"Higher fuel serves as a healthy reminder of the volatility of the inputs and may prove timely as carriers contemplate '20 growth plans and cadence of Max returns," said Evercore's Duane Pfennigwerth in a note to clients Monday, referring to the grounding of the Boeing 737 Max.
Cowen said in a note Monday that American Airlines will be the most affected by the surge in oil prices because it's the world's largest consumer of jet fuel.
"Jet fuel is ~15 cents per gallon higher today than it was on Friday and we expect the US airline stocks to be pressured until they are able to offset the cost of fuel," Cowen equity researcher Helane Becker said in a note to clients.
Morgan Stanley said exploration and production companies are the best positioned within the energy sector to capture the benefit of the short-term rally in oil prices.
"While higher leverage and cost structure mid-cap stocks might rally most in response to the price spike, we continue to prefer low cost structure companies that are positioned to outperform in any oil price environment," Morgan Stanley equity analyst and commodities strategist Devin McDermott said in a note to clients on Monday.
Mizuhu Securities upgraded Permian-focused Parsley Energy, up 7.35% Monday morning, to buy as a result of the attacks.
Energy stocks have gotten slammed in the past few years and Citi's Tobias Levkovich said in theory, the sector should benefit from higher oil prices, "but the relative performance of the hydrocarbon sector has not been as tightly correlated with crude as seen in the past, possibly due to continued poor returns on equity."
—With reporting from CNBC's Michael Bloom.