Reinventing Investment Strategies for Oil and Gas in 2025

The 2025 Israel-Iran conflict has underscored a hard truth: energy markets are no longer insulated from the ripple effects of regional instability. As the world grapples with the fallout, investors and governments are recalibrating their strategies for oil and gas infrastructure, prioritizing resilience, diversification, and agility. The stakes are high—not just for energy firms but for global economies dependent on stable fuel flows.

The New Normal: Infrastructure as a Geopolitical Battleground

The Strait of Hormuz, through which 20 million barrels of oil and 20% of global LNG transit daily, remains a focal point of anxiety. While Iran has not yet closed the strait, the mere threat has spiked volatility in energy markets. Investors are now factoring in “geopolitical risk premiums” into their models, with oil futures curves steepening and options volatility surging. For example, the price of Brent crude surged 18% in the immediate aftermath of the conflict, though gains have since partially reversed as Iran’s retaliatory strikes on U.S. assets in Qatar raised doubts about its capacity to escalate further.

The conflict has also exposed vulnerabilities in physical infrastructure. Attacks on refineries and fuel depots in both Israel and Iran have demonstrated how quickly regional tensions can disrupt energy supply chains. This has accelerated a shift toward diversified infrastructure, with countries like China investing in alternative routes (e.g., the Power of Siberia-2 pipeline) and LNG terminals to bypass traditional chokepoints.

Diversification: From Pipelines to Hydrogen

The collapse of traditional gas pipelines, such as Ukraine’s transit corridor and the reduced functionality of Nord Stream 1 and 2, has forced a reevaluation of energy infrastructure. The U.S. has emerged as a dominant LNG supplier, but this overreliance carries risks—volatile pricing, infrastructure bottlenecks, and environmental costs. As a result, investors are increasingly turning to alternative energy vectors.

Green hydrogen and biogas are gaining traction as near-term solutions. The U.S. has allocated $570 billion for hydrogen projects through 2030, though only $39 billion has reached final investment decision (FID) to date. Government support, such as the Inflation Reduction Act’s 45V credit, is critical for these projects’ viability. Meanwhile, biogas and renewable natural gas (RNG) are leveraging state-level incentives and tax credits to scale production, though feedstock limitations and processing costs remain hurdles.

Midstream Infrastructure: The Unsung Hero of Resilience

Midstream infrastructure—pipelines, storage facilities, and processing hubs—is becoming a linchpin of energy resilience. The Permian Basin’s Matterhorn Express Pipeline, launched in October 2024, exemplifies this trend, addressing bottlenecks in natural gas takeaway capacity. Yet pipeline utilization remains high, with Waha Hub spot prices frequently below zero, highlighting the need for continued expansion.

Investors are also hedging against geopolitical shocks by funding midstream projects in less volatile regions. For instance, the U.S. is seeing a surge in natural gas infrastructure to meet rising electricity demand from data centers, which are projected to account for 9% of U.S. electricity by 2030.

National Oil Companies: Balancing Act in a Shifting Landscape

Middle Eastern national oil companies (NOCs) are navigating a delicate balancing act. They must maintain crude production to meet global demand, fulfill COP28 commitments, and sustain their economies amid fluctuating oil prices. These firms are diversifying into renewables and leveraging government-backed financing to fund energy transitions. The UAE’s $30 billion global finance fund and its hydrogen production targets illustrate this dual focus.

Conversely, refining and marketing sectors face headwinds. With growth in traditional fuels expected to stagnate, refiners are pivoting to low-carbon alternatives. Companies like SLB and Nabors Industries are expanding into carbon capture and hydrogen generation, while digital innovation (e.g., connected car payment systems) enhances operational efficiency.

Policy Signals and the Road Ahead

Geopolitical risk is now intertwined with energy policy. The U.S. under President Trump has prioritized energy independence and lower costs, advocating for increased oil and gas production and nuclear energy. Meanwhile, global elections in over 70 countries in 2024 have reshaped energy strategies, with voters scrutinizing national energy plans.

For investors, the key takeaway is to remain agile. Diversify across LNG, midstream infrastructure, and emerging technologies like green hydrogen. Monitor policy shifts—such as Trump’s sanctions adjustments or OPEC’s production decisions—and avoid overreacting to short-term volatility. As history shows, the S&P 500 has historically posted positive returns during oil price spikes, suggesting that long-term, diversified portfolios can weather geopolitical storms.

Conclusion: A Call for Prudence and Innovation

The 2025 Israel-Iran conflict has been a wake-up call. Energy markets are no longer linear systems but complex webs vulnerable to disruption. Investors must prioritize resilience over efficiency, betting on infrastructure that can withstand geopolitical shocks. This means embracing diversification, leveraging digital tools, and staying attuned to policy signals.

In an era of uncertainty, the most successful energy strategies will be those that adapt—not just to today’s crises, but to the volatility of tomorrow.