By Ben Leyland, senior fund manager of the JOHCM Global Opportunities Strategy
Energy resilience is back at the top of the policy agenda. As the conflict in Iran and disruptions through the Strait of Hormuz persist, one conclusion is already clear – that greater energy self-sufficiency is no longer a choice but a strategic imperative.
Initially, markets fixated on higher oil and gas prices, supply disruptions and the prospect of short-term windfalls for commodity producers. But the more important long-term implication is the shift towards energy resilience and domestic supply. Recent geopolitical shocks have laid bare the fragility of concentrated supply routes, making the case for more resilient, diversified energy systems.
Even if the Strait of Hormuz reopened tomorrow, the focus would still be on strengthening infrastructure, securing supply chains and reducing reliance on fossil fuels. As a result, capital expenditure is likely to accelerate most rapidly in the regions currently most exposed as governments and industries fortify their long-term energy security.
We are seeing opportunities emerging across domestic energy production, LNG infrastructure, renewables, nuclear power and electrification.
Increasing domestic production
Countries with the ability to produce more oil and gas domestically are set to benefit.
The US is already largely self-sufficient, but other Western producers – including Canada, Norway and Australia – are also well placed. This is not a return to fossil fuel dependence, rather a need to reduce reliance on unstable suppliers such as the Middle East, Russia and OPEC/ OPEC+ nations.
Domestic production offers security, predictability and insulation from geopolitical shocks. For investors, it also creates opportunities in the companies linked to services in extraction, transportation and field development.
Expanding LNG infrastructure
The globalisation of natural gas is continuing through the build-out of liquefied natural gas (LNG) infrastructure, which would appear to have been given another leg of growth from the crises.
Recent price moves highlight the imbalance. Since the conflict escalated, European gas prices have risen sharply, while Asian LNG benchmarks have been more volatile due to their reliance on long-distance Middle Eastern shipments. US gas prices, by contrast, have remained relatively insulated thanks to abundant domestic supply.
Diversified LNG infrastructure is becoming critical, from liquefaction plants at the export end to regasification terminals at the import side.
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Canada is a clear example. The buildout of LNG facilities on the country’s west coast could materially change this dynamic by enabling faster exports into Asian markets.
However, LNG investment is not an overnight story. Canadian plants only begin operations from next year onwards and medium-term opportunities may lie not with commodity producers, but with suppliers of industrial equipment, turbines, engineering services and infrastructure technology. Many of these businesses also generate recurring long-term service revenues, supporting more durable earnings streams than direct commodity exposure.
Renewables: A second wave?
Renewables enjoyed an ESG-driven surge of enthusiasm five to 10 years ago, followed by stagnation as interest rates rose and projects became harder to deliver.
Now, geopolitical uncertainty may create the conditions for a second wave in wind and solar deployment, this time driven less by decarbonisation targets and more by energy security and industrial competitiveness. Countries which invested early in renewables, and as a result enjoy lower and more stable power prices, are seeing the benefits.
Nuclear power’s renaissance
Nuclear energy is re-entering the debate as the need for reliable, low-carbon baseload power becomes harder to ignore. Even Germany and Japan – both of which moved away from nuclear after Fukushima in 2011 – are reassessing its role in long-term energy resilience.
Like LNG, nuclear is a long-duration infrastructure story. The more immediate beneficiaries are likely to be industrial equipment providers, engineering specialists, and businesses supporting grid modernisation and plant upgrades.
Electrification
Electrification of transport, heating and industrial processes is a structural driver of lower fossil fuel dependence. Electric vehicle adoption in Europe is now at 15% of new car sales, but growth has slowed. The next phase will be driven less by subsidies and more by consumer economics.
Companies are also electrifying. Data centres and industrial sites are increasingly building their own renewable or gas powered microgrids to reduce reliance on national grids, reflecting a broader shift toward energy autonomy at both the national and corporate level.
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The investment case extends beyond autos into grid infrastructure, power equipment, semiconductors, industrial automation and energy management systems.
Europe: Short-term pain, long-term opportunity
Europe is the most exposed region in the short term, given its dependence on imported energy. That vulnerability could turn it into a centre for long-term investment. Regions most exposed in the short-term often become the biggest long-term opportunities, as they are forced to invest aggressively in new infrastructure.
A global problem needs a global solution
The Ukraine war created a largely European energy crisis, now the Iran conflict has globalised it. There is no single path to energy resilience – solutions will vary by geography, resources and politics.
But for investors, the most attractive opportunities sit with companies with global expertise, technological leadership and multi-regional exposure – businesses able to deploy their capabilities wherever demand emerges across multiple investment cycles.
