Supply shock sparks energy security push

The Iran war has exposed how fragile global energy supply chains have become. Even before the conflict, oil markets were tightening as spare capacity narrowed and producer costs increased (Figure 1). The supply shock has sharpened investor focus on energy security—and on the industries positioned to benefit from a world of scarcer supply.

Oil markets were tightening before the Iran war

(Fig. 1) Rig count was falling despite elevated prices

^{As of April 30, 2026
Sources: Baker Hughes, West Texas Intermediate oil price.}

Although the conflict has not altered the industry’s structurally lower productivity trajectory, it has intensified the geopolitical risks supporting higher prices. The initial price spike is likely to moderate as shipping traffic resumes, but declining productivity and elevated geopolitical risk are likely to keep oil prices structurally higher than they were before the conflict. Oil refineries have so far proven relatively resistant to war‑related damage, so the market for refined petroleum products, such as gasoline, diesel, and jet fuel, should move broadly in line with oil prices.

Liquefied natural gas (LNG) is a different story. A large LNG production facility in Qatar was heavily damaged, cutting off a major share of LNG supply to Asia, potentially for several years. In the short term, the outage is likely to push LNG prices sharply higher; over time, however, sustained shortages could accelerate a shift back toward coal or forward into renewables in parts of Asia, reducing long‑term LNG demand.

LNG is also a key input in the fertilizer manufacturing process, raising fears of food price inflation and even scarcity. Although fertilizer costs are likely to rise, we do not expect a full‑scale food crisis. State‑backed fertilizer producers would likely continue supplying global markets, and the countries involved in the conflict have strong incentives to prioritize fertilizer shipments through the Strait of Hormuz over other commodities.

Where should investors in commodities‑related sectors focus in this environment? We see opportunities in businesses tied to energy scarcity, such as oil field services firms; in energy diversification, including nuclear and renewable power; and in producers of critical minerals such as tungsten and uranium, which are often found in emerging markets.

Investment implications

• The oil field services, nuclear and renewable energy, and critical materials industries may offer opportunities as investment in energy security and supply diversification accelerates.
• Demand destruction from structurally higher LNG prices could weigh on LNG producers in the long term.