Shares of energy companies operating in Iraqi Kurdistan plunged on 7 August 2014and two U.S. companies evacuated some staff as Islamic State militants advanced within 45 kilometers (28 miles) of Arbil, a key hub for oil producers.
Companies that produce oil in the semi-autonomous region, including Oslo-listed DNO ASA, as well as London-listed Gulf Keystone Petroleum Ltd and Genel Energy Plc saw double-digit declines in their share prices as the radical Sunni militants seized 15 towns.
While the companies said their oil fields continued to operate, there are growing concerns about the security risks faced by firms active in Iraqi Kurdistan, seen as a beacon of relative stability in the region.
"Investors are now taking into account the risk," ABG Sundal Collier analyst Oeyvind Hagen said, adding it remained difficult to judge how far into the Kurdish region the Islamists could penetrate.
Shares in DNO fell as much as 24 percent and Gulf Keystone Petroleum was down 13 percent at their lowest point, before paring losses. Genel shares were down over 10 percent.
Gulf Keystone said it had increased security at its flagship Shaikan field, Iraqi Kurdistan's largest, but added that production and trucking operations were continuing safely.
DNO operates the Tawke field, in which Genel is also a partner, which produces around 120,000 barrels of oil per day.
Other Kurdistan oil producers including London-listed Afren PLC and Toronto-listed Oryx Petroleum Corporation Ltd , which operates the fields closest to the militants advance, declined to comment. Shares of Oryx were down as much as 11 percent.
Chevron Corp and Exxon Mobil said on Thursday they were evacuating staff from Kurdistan as the militants advanced.
The companies have been drilling and testing new wells in the region. Exxon said little about its Kurdistan holdings at an analysts meeting earlier this year. As recently as last week, Chevron executives told investors they were "very encouraged" by initial Kurdistan well results.
Marathon Oil Corp, a U.S. oil and gas company that is also drilling in Kurdistan said in a statement that all of its employees are currently accounted for but evacuation is under consideration if the security situation worsens.
Peshmerga Pull Back
Energy companies have flocked to Iraqi Kurdistan in recent years, hoping to access what is believed to be one of the world's last huge conventional onshore oil deposits.
The regional capital Arbil houses many western oil workers and executives, and has seen an investment boom despite tensions with Baghdad over the control of oil sales and revenues.
Most worrying for investors this week has been the pullback of the Kurdistan Regional Government's Peshmerga soldiers.
Facing militants freshly armed with U.S.-made heavy weapons seized from the Iraqi army, the Peshmergas have given up several towns since Sunday.
Witnesses on Thursday said the militants had seized the town of Makhmur, around 40 km from the regional capital Arbil, but Kurdish officials told local media their forces remained in control there and television channels broadcast footage of Peshmerga fighters driving around the town.
The militant group said in a statement on its Twitter account that its fighters had seized 15 towns, the strategic Mosul dam on the Tigris River and a military base.
DNO, which describes its prospects in Iraqi Kurdistan as 'the jewel in the crown' on its website, was the first international energy company to enter the Iraqi Kurdistan region in 2004.
Production from the region accounted for 55 percent of its revenue last year.