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Powering through energy bottlenecks
Market take
Weekly video_20260622
Hugo Liebaert
Sustainable Research and Analytics
BlackRock Investment Institute
Header:
CAPITAL AT RISK. MARKETING MATERIAL.
Opening frame: What’s driving markets? Market take
Camera frame
Title slide: Strong earnings key as rates stay high
The recent Middle East supply disruption is a reminder of how the world’s energy system remains largely dependent on a few critical chokepoints. This comes at a time when electricity demand, driven in no small part by AI, is rising faster than expected.
1: Bottlenecks driving returns
We’ve long argued that we are in a world shaped by supply, where access to energy, infrastructure and other critical resources shape economic and market outcomes. In this environment, companies positioned to benefit from rising electricity demand have outperformed – from gas turbine manufacturers to utilities.
But recently, the relative appeal of energy suppliers that rely less on vulnerable transport routes has grown.
Why? The market’s recognition of a two-sided energy challenge: securing fuel supply today while building enough power capacity for tomorrow.
2: Where energy security goes from here
Now, governments, companies and investors have to confront a broader question: where does energy security go from here?
The answer is two-fold, in our view. On one hand, the immediate priority is securing supply, improving flexibility and reducing dependence on vulnerable routes and infrastructure.
On the other: the challenge is to accelerate electrification, which is a longer-term task. So far, countries are responding in different ways based on their available resources, infrastructure and policy priorities.
3: Investing in bottlenecks
The takeaway? Active management and thematic investing are key as opportunities emerge around the bottlenecks that connect energy supply with demand. These opportunities span both fuel and power systems, public and private markets, from liquefied natural gas export capacity to grids and energy storage.
Regionally, we favor developed market supply chains and infrastructure assets. We’re selective in emerging markets where opportunities are differentiated by country policy framework and positioning.
Outro: Here’s our Market take
The combined pressures of vulnerable energy supply and rising power demand are making energy security a durable investment theme. We favor active exposure to infrastructure and critical bottlenecks to play it.
Closing frame: Read details: blackrock.com/weekly-commentary
Chokepoints in focus
Energy security remains a critical investment theme. We favor active exposure to infrastructure and critical bottlenecks.
Market backdrop
Kevin Warsh chaired his first Federal Reserve meeting, surprising markets by dropping forward guidance and launching a broad policy review.
Week ahead
This week we look to US core PCE for whether higher energy costs are pushing up underlying inflation.
The expected reopening of the Strait of Hormuz helped push oil prices lower. Yet the recent disruption is a reminder of how the world's energy system remains heavily dependent on a few critical bottlenecks. This comes at a time when electricity demand, driven in no small part by AI, is rising faster than many expected. These twin forces create opportunities in energy infrastructure and the associated bottlenecks that underpin energy flows.
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Bottlenecks driving returns
Performance of selected equity power sectors vs MSCI World, 2025-2026
Past performance is not a guarantee of future returns. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index. Source: BlackRock Investment Institute, with data from Bloomberg, June 2026.Notes: Gas turbines and fuel cells: Mitsubishi Heavy Industries, GE Vernova and Siemens Energy; Copper miners: STOXX Global Copper Miners Index; Clean energy: iShares Global Clean Energy ETF; Non-SoH LNG exporters: Cheniere Energy, Woodside Energy, Venture Global and Santos.Custom indices are equal weighted and rebased to 100 on Jan. 1, 2025.
We have long argued that we are in a world shaped by supply, where access to energy, infrastructure and other critical resources increasingly determine economic and market outcomes. Companies positioned to benefit from rising electricity demand have outperformed, from gas-turbine manufacturers and copper producers to clean-energy firms helping expand power systems for AI and electrification. (See chart) More recently, concerns over the Strait of Hormuz shifted attention to fuel security, boosting the relative appeal of energy suppliers less dependent on vulnerable transport routes (See non-SoH LNG exporter line). Together, these moves suggest an increased recognition of both sides of the energy challenge: securing fuel supply today while building enough power capacity for tomorrow.
Oil prices retreated to March lows, but the broader challenge of energy security and resilience remains. How should governments, companies and investors best respond? We see the answer unfolding across two horizons. The first is the immediate need to secure supply, improve flexibility and reduce dependence on vulnerable routes and infrastructure. That is creating opportunities for fuel and commodity exporters outside the Strait of Hormuz, as well as for fuel transport, storage and distribution infrastructure that can help diversify supply and reduce exposure to key chokepoints. Providers that can deliver reliable fuel and power outside existing bottlenecks stand to benefit.
Rising energy demand and security needs
The second is longer term, where the challenge is not simply to produce more energy, but to meet rising demand while balancing energy security, affordability, resilience and decarbonization objectives. While AI and data centers are contributing to rising electricity demand, they are just one driver alongside electrification, rising cooling needs and economic growth. But countries are responding in different ways based on their resources, infrastructure and policy priorities. For fuel-importing economies, repeated shocks are strengthening the incentives to invest in electrification, grids, storage and domestic power systems. For energy exporters, the opportunity often lies in expanding and upgrading the infrastructure needed to continue delivering supply while also meeting rising energy and power demand at home.
Energy has been one of the strongest-performing sectors this year, supported by earnings upgrades and concerns over supply security. Yet we do not think the opportunity is best expressed through a broad sector allocation. While recent disruptions have highlighted the value of energy suppliers outside major bottlenecks, we see more durable opportunities in the infrastructure that supports energy security and rising power demand. That reinforces our preference for a selective and active approach focused on bottlenecks and secure supply rather than energy producers more broadly. Regionally, we favor developed-market supply chains and infrastructure assets positioned to benefit from investment in energy security, while remaining more selective in emerging markets, where opportunities are increasingly differentiated by policy frameworks and exposure to global energy supply chains.
Our bottom line
The combined pressures of vulnerable energy supply and rising power demand are making energy security a durable investment theme, favoring infrastructure and critical bottlenecks, in our view.
Market backdrop
The S&P 500 gained 1% and Treasury yields rose last week following Kevin Warsh's first meeting as Federal Reserve chair. Warsh’s first meeting seemed to be more about creating optionality. No matter what the FOMC views are at this stage, the five task forces he created have the potential to reset the basis of all these forecasts. This could result in more interest rate volatility going forward – not necessarily a bad thing if it reflects the macro rather than Fed’s reaction function uncertainty.
This week, US core PCE inflation will be in focus as markets assess whether higher energy costs are feeding into underlying price pressures. In Japan, service PPI and CPI data will provide an update on inflation trends, while flash PMIs across major economies and US consumer sentiment will offer a read on economic momentum.
Week ahead
Past performance is not a reliable indicator of current or future results. Indexes are unmanaged and do not account for fees. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from LSEG Datastream as of June 17, 2026. Notes: The two ends of the bars show the lowest and highest res at any point year to date, and the dots represent current year-to-date res. Emerging market (EM), high yield and global corporate investment grade (IG) res are denominated in US dollars, and the rest in local currencies. Indexes or prices used are: spot Brent crude, ICE US Dollar Index (DXY), spot gold, spot bitcoin, MSCI Emerging Markets Index, MSCI Europe Index, LSEG Datastream 10-year benchmark government bond index (US, Germany and Italy), Bloomberg Global High Yield Index, J.P. Morgan EMBI Index, Bloomberg Global Corporate Index and MSCI USA Index.
June 23
Global Flash PMIs
June 24
Japan service PPI
June 25
US Core PCE, durable goods
June 26
University of Michigan sentiment; Japan CPI
Read our past weekly commentaries here.
Big calls
Our highest conviction views on six- to 12-month (tactical) and over five-year (strategic) horizons, June 2026
| Reasons | ||
|---|---|---|
| Tactical | ||
| Favor AI beneficiaries | We favor infrastructure and equipment supporting the AI buildout such as semiconductors, power and data centers. We think they stand to benefit no matter AI’s eventual winners or losers. We see the AI boom lifting US corporate earnings, underpinning our US equity overweight. | |
| Selected international exposures | We like hard-currency EM debt on economic resilience, disciplined fiscal and monetary policy and a high ratio of commodities exporters. We’re also overweight EM equities, preferring commodity exporters and AI beneficiaries. In Europe, we favor equity sectors like infrastructure. | |
| Evolving diversifiers | We suggest looking for “plan B” portfolio hedges such as thematic opportunities related to the AI buildout and search for energy security. Long-term US Treasuries no longer provide a buffer against equity market declines, and gold also has shown to be an ineffective diversifier. | |
| Strategic | ||
| Portfolio construction | We favor a scenario-based approach as AI winners and losers emerge. We lean on private markets and hedge funds for idiosyncratic returns and to anchor portfolios in mega forces. | |
| Infrastructure equity and private credit | We find infrastructure equity valuations attractive as geopolitical fragmentation and the AI buildout underpin structural demand. We still like private credit but see an increase in dispersion of returns. This highlights the importance of manager selection. | |
| Beyond market cap benchmarks | We get granular in public markets. We are underweight DM government bonds as inflationary pressure mounts. Within equities, we lean into both EM and DM equity – and are selective in both. We like stocks across both regions that are supported by the accelerating AI buildout. | |
Note: Views are from a US dollar perspective, June 2026. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any particular funds, strategy or security.
Tactical granular views table
Six- to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, June 2026
We have lengthened our tactical investment horizon back to six to 12 months. The table below reflects this and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at a time of heightened volatility.
Granular views
Six- to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, June 2026
| Asset | Tactical view | Commentary | ||||
|---|---|---|---|---|---|---|
| Equities | ||||||
| United States |  |
We are overweight. Contained damage to global growth from the Mideast conflict and strong earnings expectations – particularly in tech – keep us risk-on. | ||||
| Europe |  |
We are neutral. Europe’s high exposure to the energy shock from the Mideast conflict makes it vulnerable to higher inflation and lower growth. | ||||
| UK | |
We are neutral. Valuations remain attractive relative to the US, but we see few near-term catalysts to trigger a shift. | ||||
| Japan | |
We are neutral. Japan’s exposure to imported energy may erode strong equity gains powered by healthy corporate balance sheets and governance reforms. | ||||
| Emerging markets (EM) | |
We are overweight yet stay selective. We favor Asian countries that manufacture critical AI components and Latin American energy and commodity exporters. | ||||
| China | |
We are neutral. Trade relations with the US have steadied, but property stress and an aging population still constrain the macro outlook. Relatively resilient activity limits near-term policy urgency. We like sectors like AI, automation and power generation. | ||||
| Fixed income | ||||||
| Short US Treasuries | |
We are neutral. Shorter-term bonds are relatively attractive as the market has woken up to persistent inflation and higher rates. | ||||
| Long US Treasuries |  |
We are underweight. Yields already faced upward pressure from rising term premia, as investors demand more compensation for the risk of holding long-term debt. The recent energy price shock compounds this by aggravating pre-existing inflationary pressures. | ||||
| Global inflation-linked bonds | |
We are neutral. We think inflation will settle above pre-pandemic levels, but markets may not price this in the near term as growth cools. | ||||
| Euro area government bonds | |
We are neutral short-term European government bonds. The market has repriced the ECB policy path more in line with our view. We think increased German bond issuance to finance its fiscal stimulus package is already largely reflected in the current level of 10-year yields. | ||||
| UK Gilts | |
We are neutral. We expect volatility in gilts over the near-term. Gas powers much of the UK’s electricity, but storage is limited – making it especially vulnerable to a resurgence in inflation. | ||||
| Japanese government bonds |  |
We are underweight. Rate hikes, higher global term premium and heavy bond issuance will likely drive yields up further. | ||||
| China government bonds | |
We are neutral. China bonds offer stability and diversification but developed market yields are higher and investor sentiment shifting towards equities limits upside. | ||||
| US agency MBS | |
We are overweight. Agency MBS offer higher income than Treasuries with similar risk, and may offer more diversification amid fiscal and inflationary pressures. | ||||
| Short-term IG credit | |
We are neutral. Corporate strength means spreads are low, but they could widen if issuance increases. | ||||
| Long-term IG credit | |
We are underweight. We prefer short-term bonds less exposed to interest rate risk over long-term bonds. | ||||
| Global high yield | |
We are neutral. High yield offers more attractive carry and shorter duration, but we think dispersion between higher and weaker issuers will increase. | ||||
| Asia credit | |
We are neutral. Overall yields are attractive and fundamentals are solid, but spreads are tight. | ||||
| Emerging hard currency | |
We are overweight. EM hard-currency indexes lean towards Latin American commodity exporters such as Brazil that stand to benefit as Mideast supply plummets. | ||||
| Emerging local currency | |
We are neutral. The US dollar has been strengthening as a safe-haven currency in the wake of the Middle East conflict. This could reverse year-to-date gains driven by a falling USD. | ||||
Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a US dollar perspective. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.
Euro-denominated tactical granular views
Six to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, June 2026
We have lengthened our tactical investment horizon back to six to 12 months. The table below reflects this and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at a time of heightened volatility.
| Asset | Tactical view | Commentary | ||
|---|---|---|---|---|
| Equities | ||||
| Europe ex UK | |
We are neutral. We would need to see more business-friendly policy and deeper capital markets for recent outperformance to continue and to justify a broad overweight. We stay selective, favoring financials, utilities and healthcare. | ||
| Germany | |
We are neutral. Increased spending on defense and infrastructure could boost the corporate sector. But valuations rose significantly in 2025 and 2026 earnings revisions for other countries are outpacing Germany. | ||
| France | |
We are neutral. Political uncertainty could continue to drag corporate earnings behind peer markets. Yet some major French firms are shielded from domestic weakness, as foreign activity accounts for most of their revenues and operations. | ||
| Italy | |
We are neutral. Valuations are supportive relative to peers. Yet we think the growth and earnings outperformance that characterized 2022-2023 is unlikely to persist as fiscal consolidation continues and the impact of prior stimulus peters out. | ||
| Spain | |
We are overweight. Valuations and earnings growth are supportive relative to peers. Financials, utilities and infrastructure stocks stand to gain from a strong economic backdrop and advancements in AI. High exposure to fast-growing areas like emerging markets is also supportive. | ||
| Netherlands | |
We are neutral. Technology and semiconductors feature heavily in the Dutch stock market, but that’s offset by other sectors seeing less favorable valuations and a weaker earnings outlook than European peers. | ||
| Switzerland |  |
We are neutral. Valuations have improved, but the earnings outlook is weaker than other European markets. If global risk appetite stays strong, the index’s tilt to stable, less volatile sectors may weigh on performance. | ||
| UK | |
We are neutral. Valuations remain attractive relative to the US, but we see few near-term catalysts to trigger a shift. | ||
| Fixed income | ||||
| Euro area government bonds | |
We are neutral short-term European government bonds. The market has repriced the ECB policy path more in line with our view. We think increased German bond issuance to finance its fiscal stimulus package is already largely reflected in the current level of 10-year yields. | ||
| German bunds | |
We are neutral. Markets have largely priced in fiscal stimulus and bond issuance, and expectations for policy rates align with our view. | ||
| French OATs | |
We are neutral. Political uncertainty, high budget deficits and slow structural reforms could stoke volatility, but current spreads incorporate these risks and we don’t expect a worsening from here. | ||
| Italian BTPs | |
We are neutral. Demand from Italian households is strong at current yield levels. Spreads tightened in line with its sovereign credit upgrade, but a persistently high debt-to-GDP levels means they likely won’t tighten further. | ||
| UK gilts | |
We are neutral. We expect volatility in gilts over the near-term. Gas powers much of the UK’s electricity, but storage is limited – making it especially vulnerable to a resurgence in inflation. | ||
| Swiss government bonds | |
We are neutral. We don’t think the Swiss National Bank will slash policy rates to below zero, as markets expect. | ||
| European inflation-protected securities | |
We are neutral. Our medium-term inflation expectations align with those implied in current market pricing. | ||
| European investment grade | |
We are neutral. We favor short- to medium-term debt and Europe over the US An intense re-leveraging cycle to support the AI buildout could put upward pressure on US spreads, making Europe relatively more attractive. | ||
| European high yield | |
We are overweight. Spreads hover near historic lows, but credit losses have been limited in this cycle and better economic growth in 2026 could reduce them further. | ||
Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a euro perspective, June 2026. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.
Meet the authors
Wei Li
Global Chief Investment Strategist – BlackRock Investment Institute
Christopher Kaminker
Head of Sustainable Investment and Research Analytics - BlackRock Investment Institute
Chris Weber
Sustainable Investment and Research Analytics – BlackRock Investment Institute
Alastair Bishop
Portfolio Manager, Thematics and Sectors Team - BlackRock Fundamental Equities
Hugo Liebaert
Sustainable Investment and Research Analytics – BlackRock Investment Institute
This material is for distribution to Professional Clients (as defined by the FCA Rules) and should not be relied upon by any other persons.
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Sources: Bloomberg unless otherwise specified.
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