ET and HESM now yield over 8% after the Strait of Hormuz risk premium unwound. Fee-based cash flows and investment-grade balance sheets support the thesis despite the pullback.
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Midstream energy stocks have sold off roughly 5% from late-April highs after reports signaled the Strait of Hormuz disruption may be easing. The move pushed yields on Enterprise Products Partners (ET) and Hess Midstream (HESM) above 8%, levels last seen in late 2023.
Enterprise Products now yields about 8.2%. Hess Midstream yields roughly 8.5%. Both companies sit on investment-grade balance sheets and generate the bulk of their cash flows from fee-based contracts. That structure insulates them from direct commodity price moves. Enterprise reported first-quarter distributable cash flow of $1.7 billion, covering its distribution by 1.7x. Hess Midstream posted a 12% year-over-year increase in adjusted EBITDA.
The selloff reflects a broader rotation out of energy, not a company-specific deterioration. The Strait of Hormuz risk premium had supported a bid across energy infrastructure since early March, when Houthi attacks on Red Sea shipping escalated. With diplomatic signals pointing toward de-escalation, that premium is unwinding. The underlying demand picture is unchanged. U.S. natural gas production is running near record levels. Crude oil exports continue to grow.
What changes with the pullback is the entry price. At current levels, ET and HESM offer a spread of roughly 200 basis points over the 10-year Treasury. That spread has historically compressed when the sector rallies. The risk is that the Hormuz de-escalation proves temporary. A return of the risk premium would lift the stocks, not hurt them. The bigger near-term risk is a broader energy selloff if OPEC+ signals a production increase at its June meeting. That would pressure the sector further. The fee-based cash flows would remain intact.
The analyst who published the original thesis holds long positions in both ET and HESM. The next catalyst is the late-July earnings season, when management teams update volume guidance. If the outlook stays strong, the current yield levels may look cheap in hindsight.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.