Assessing the Impact of Israel-Iran Conflict on Global Energy Prices

The escalating tensions between Israel and Iran have heightened geopolitical risks, leading to a surge in oil prices, with Brent crude trading at $74 per barrel, up 7% on the day. We expect oil prices to remain supported at current levels, with a potential upside to $100 per barrel if the situation escalates further. This uncertainty could lead to a flight to safe-haven assets such as gold, the US dollar, and sovereign bonds, and defense stocks, utilities, and defense contractors could be protected in this environment.

The structural changes in the oil market, driven by shifting demand and supply dynamics, are likely to have significant implications for investors, with the refining sector expected to be particularly affected. We believe that investors should focus on companies with strategic advantages in the petrochemical sector, as well as those positioned to benefit from the growth in biofuels production and NGLs.