Geopolitical tensions between the U.S. and Iran have pushed oil prices to seven-month highs, as markets factor in a sizable risk premium ahead of critical negotiations. Despite heavy sanctions by the West, Iran’s oil output has recovered to near pre-sanctions levels thanks to the OPEC producer offering discounted crude and having a ready market by Chinese independent refiners.
According to energy market consultancy FGE NexantECA, oil prices could spike to $100 per barrel if Washington declares war on Tehran, good for nearly ~45% upside from the current Brent price in the low 70s. This environment has propelled the European oil and gas sector to record levels, with the STOXX Europe 600 Oil & Gas Index recently hitting an all-time high.
UBS analysts say that the current geopolitical and macroeconomic backdrop could favour upstream-levered European producers in the near term, while integrated majors come with structural advantages, making them preferred longer-term buys.
Here are the top 5 European Oil & Gas picks.
#1. TotalEnergies
Market Cap: $168.2B
Dividend Yield (FWD): 5.06%
52-Week Returns: 30.2%
French Oil & Gas multinational TotalEnergies (NYSE:TTE) is considered a solid, income-focused stock thanks to a high, but sustainable, dividend yield that’s well supported. UBS views TTE as well-positioned to capture upside from higher Brent prices while maintaining resilience through strong cash generation. Wall Street also likes TTE due to its balanced integrated model and strong production growth pipeline.
TotalEnergies increased its proposed dividend for the fiscal year 2025 to €3.40 per share, representing a 5.6% increase over the 2024 level, and its interim dividends to €0.85 per share, marking a 7.6% increase with the payout ratio at roughly 60%.
TotalEnergies has maintained a strong shareholder return policy, with plans to return a significant portion of cash flow through dividends and share buybacks. The board confirmed a target of $2 billion in share buybacks per quarter for 2025, suggesting a total annual buyback commitment of roughly $8 billion, consistent with the 2024 level. Further, TotalEnergies has set a target to achieve 5% total energy growth in 2026, including a 3% increase in oil and gas production and a 25% surge in electricity net production.
#2. Eni S.p.A.
Market Cap: $67.0B
Dividend Yield (TTM): 5.2%
52-Week Returns: 51.2%
Italy’s National Oil Company, Eni S.p.A. (NYSE:E), is rated a Buy thanks to its “best-in-class” capital allocation and attractive growth prospects. According to UBS, Eni’s upstream portfolio is highly sensitive to crude price movements, making it a primary beneficiary of an Iran-driven supply premium.
Eni is noted for being a solid dividend payer, which has boosted total shareholder returns significantly in recent years. The company is actively focusing on energy transition, reducing emissions, and maintaining strong cash generation, which may appeal to long-term ESG investors. Wall Street loves the company’s strong, diversified portfolio and attractive dividends; however, it has a consensus “Hold” rating on E stock, with 15 analysts advising hold, 7 buy, and 1 sell, indicating a neutral consensus. After hitting 52-week highs, the stock is fairly valued or slightly overvalued, with a P/E of 21.74x, above the 14.65x industry average.
#3. Galp Energia
Market Cap: $15.1B
Dividend Yield (FWD): 3.34%
52-Week Returns: 46.9%
Galp Energia (OTCPK:GLPEF) is Portugal’s leading integrated energy company and the country’s most dominant national energy player. It was formed in 1999 through the merger of several entities, including Petrogal and Gás de Portugal, the country’s former NOC.
UBS has upgraded Galp Energia to a “Buy” rating (from Neutral) with a €20 price target, driven by strong growth prospects from the Namibia Mopane discovery, increased production in Brazil, and improved downstream/LNG performance. Announced in early 2024, the company’s massive Mopane light oil and gas-condensate discovery in Namibia’s Orange Basin (PEL 83) is estimated to contain over 10 billion barrels of oil equivalent, potentially making it a “supergiant” field.
Located north of Venus and Graff, Mopane has the potential to transform Namibia into a major African oil producer. UBS has highlighted the company’s significant undervalued potential, expecting a 14% compound annual production growth rate through 2027, particularly with the Bacalhau project in Brazil also coming online. The analysts have hiked Galp Energia’s Earnings Per Share (EPS) forecasts by an average of 16% in the 2025–2027 period, also citing increased Liquefied Natural Gas (LNG) volumes and strong refining margins.
#4. Saipem
Market Cap: $168.2B
Dividend Yield (est): 6.3%
52-Week Returns: 61.3%
Saipem S.p.A. (OTCPK:SAPMF) is another Italian energy giant, providing energy and infrastructure solutions worldwide. UBS rates this company a Buy primarily on its underappreciated turnaround potential. The analysts believe the market is underestimating the speed of Saipem’s recovery, specifically expecting EBITDA margins to recover to pre-COVID levels by 2028. The company has already shown strong EBITDA growth, with margins doubling over the past four years. Further, Saipem has record-high backlog, providing high revenue and earnings visibility for the next 12-18 months.
Further, the company has other avenues to achieve growth inorganically, with the planned merger with Subsea7 (OTCPK:SUBCY) considered a strategic positive that will create a global leader in the fast-growing subsea installation and SURF segments. The merger is expected to close in the second half of 2026. Saipem has strengthened its financial position thanks to a significant reduction in net debt, and is now moving toward an investment-grade credit rating.
#5. OMV
Market Cap: $21.3B
Dividend Yield (FWD): 5.0%
52-Week Returns: 42.2%
OMV AG (OTCPK:OMVJF) is an international, integrated oil and gas company headquartered in Vienna, with the Austrian government holding a nearly one-third stake. OMV’s integrated structure, spanning upstream, downstream, and chemical businesses, provides a cushion against energy market volatility. The company has a highly diversified and integrated business model combining oil and gas with growing petrochemicals and sustainable energy (renewables, recycling). UBS rates OMV a Buy for its unique combination of upstream leverage and chemicals exposure, and also screens well on cash flow yield metrics.
OMV has a solid dividend track record, having increased its regular dividend consistently since 2015. The company has maintained its principle of providing a progressive regular dividend, intending to increase it or at least maintain the previous year’s level, along with potential additional variable dividends. The company has proposed a dividend of EUR 3.15 per share plus a variable dividend of EUR 1.25 per share for FY 2025.
Starting in the 2026 financial year (payable in 2027), OMV will amend its dividend policy to reflect the integration of Borouge Group International (BGI). The updated policy will include 50% of BGI dividends attributable to OMV, plus 20-30% of cash flow from operating activities (excluding BGI dividends).
By Alex Kimani for Oilprice.com
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