Soon, Europe is about to subsidise energy again. Sounds supportive. But the reality is far more paradoxical
Governments will step in as energy prices surge. But here’s the uncomfortable truth: 👉 Many of these same governments helped create the crisis 👉 By weakening their own energy security 💸 Now comes the real problem: Most European countries are already running structural deficits. They don’t have the fiscal room to absorb another shock. So what happens next? ➡️ Subsidies go up ➡️ Deficits widen ➡️ Policymakers panic And then the “solution” kicks in: 👉 Higher taxes 🧠 Think about the loop: • Governments subsidise households • Then raise taxes to fund it ➡️ Households end up paying for their own “relief” (with a bit of redistribution in between) 🔁 And this doesn’t stop here. The same cycle is playing out across: • Healthcare costs • Welfare expansion • Defence spending ⏳ Until the next crisis hits. And when it does, you’ll hear the same line again: “We must stabilise the economy.” 💥 Which really means: • Deficits explode • Debt issuance surges • Central banks step in 👉 Printing money 👉 Buying bonds 👉 Repeating the cycle 📌 Once you see the system, you can’t unsee it: It’s a loop of: Crisis → Spending → Debt → Money printing → Repeat ⚠️ Now here’s the part most people ignore: If your wealth is tied to assets that: • Don’t generate real returns • Can’t be moved easily • Are fully exposed to domestic policy 👉 You are far more vulnerable than you think (Yes, that includes a lot of real estate) 🧠 The uncomfortable conclusion: This isn’t about one crisis. It’s about a system. And if your portfolio isn’t positioned for it… 👉 It’s probably mispriced for reality Source: Financial Times
Despite the rally, energy stocks remain under-owned and not expensive vs. history.
Source: BofA, RBC
Returns since the start of the conflict
Source: Trend Spider
Energy sector up 25% YTD. Everything else red.
One sector carrying the market isn't a rotation. It's a warning. Source: Michael A. Gayed, CFA @leadlagreport
Asian nations rely more on energy imports from the Strait of Hormuz than Europe, the US, or Oceania.
Source: Simon Kuestenmacher @simongerman600
The Strait of Hormuz just shut down.
The Strait of Hormuz is the world’s most critical energy passage. Daily, about 100 cargo vessels transit the strait, carrying around 20% of global oil consumption, 27% of seaborne oil trade, and 20% of global LNG. Asia is the most exposed, receiving 89% of crude and 83% of LNG shipments, while the U.S. imports only about 7% via the strait. Any closure could trigger a major global energy disruption. Source: Visual Capitalist, Global Markets Investor
Goldman Sachs: some oil is moving through the Strait of Hormuz
Source: Brian Sozzi @BrianSozzi Goldman Sachs
The Strait of Hormuz disruption goes far beyond oil:
Excluding energy, Bahrain faces ~62% of its total trade disrupted. The UAE is exposed at ~58%, and Qatar at ~46%. Gulf ports have become military targets, with the Strait effectively shut, sending shipping rates soaring and halting air cargo for a week. Source: Global Markets Investor @GlobalMktObserv
