Think Iran Is Driving Energy Deals? Think Again.

Oil and gas dealmaking is experiencing a significant resurgence driven by a massive influx of private capital and investor confidence in the sector's capital discipline. While geopolitical tensions in Iran have captured headlines, market experts suggest the recovery was already well underway due to stable commodity prices and record cash returns. This shift marks a transition from a period of relative dormancy to an active cycle of acquisitions and divestitures across both established and emerging basins.

J.P. Hanson, global head of Houlihan Lokey’s oil and gas group, reports that the current acceleration in M&A activity is fueled by approximately $40 billion in private capital raised over a 12-month period. This rebound followed a typical post-consolidation lull that lasted from mid-2024 through the first half of 2025, a period characterized by pulling commodity prices and choppy capital markets. The recovery became evident in the third quarter of 2025, when deal activity surged by 100% compared to the previous quarter, signaling a renewed appetite for upstream assets among private equity, private credit, and institutional investors.

The volume of transactions has remained robust, with 130 deals recorded in the third quarter of 2025 and 106 in the fourth quarter. This momentum continued into the first two months of 2026, which saw 115 deals—surpassing the volume of the entire previous quarter before the Iran conflict even began. Notable large-scale transactions during this cycle include the $7.5 billion Mitsubishi-Aethon deal and EOG’s $5-plus billion acquisition of Encino, alongside the significant Devon-Coterra merger. These deals highlight a market where generalist capital is being re-attracted by strong cash returns and the opening of asset-backed security (ABS) markets to the oil and gas sector.

Beyond the headline-grabbing transactions, operators are strategically expanding their portfolios into new economic zones within the Lower 48 and conventional oil opportunities in Alaska. Technological advances are making locations beyond traditional Tier 1 zones economically viable, challenging the perception that high-quality inventory is exhausted. This strategic shift reflects a broader industry trend where operators are leveraging their strong balance sheets and capital discipline to secure long-term inventory. Consequently, the sector is seeing a diversification of investment that extends beyond domestic shale, supported by a stable environment for commodity prices and a significant amount of dry powder ready for deployment.