Investing.com -- Morgan Stanley analysts raised their price targets for European energy services companies by approximately 20%, citing improving fundamentals and increased investor participation following Middle East conflict developments.

The investment bank noted that long-cycle activity exposure has positioned these companies favorably heading into 2026. Macro factors throughout the year have attracted broader investor interest in the sector, leading to multiple expansion.

Morgan Stanley identified three key drivers stemming from the Middle East conflict: reconstruction, redundancy and relocation. The firm said these factors have helped reduce market uncertainty around services demand.

The analysts drew parallels to previous market cycles, suggesting share prices could reach multiple levels not observed in the past decade.

Morgan Stanley expressed preference for offshore-focused companies including SBM Offshore, Subsea 7 and Saipem. The firm showed less enthusiasm for Valaris, TechnipFMC and GTT despite the broader sector rally.

The bank characterized the current environment as a continuation of an improving outlook that began years ago, with recent geopolitical events serving as a catalyst for renewed investor engagement and material share price revaluations.