Banking and Finance Institutions

BNP Paribas: Energy security returns to the top of the agenda

11 August 2026

Edited by the Editorial Staff

In a context marked by repeated energy shocks and growing geopolitical tensions, energy security is once again at the center of investors' concerns. Edmund Ching, Chief Strategist at BNP Paribas Wealth Management, discusses the implications for portfolios.

The world has experienced several major energy shocks in recent years. What's your overall assessment of the situation?

What we are witnessing is, frankly, extraordinary and deeply worrying. In the space of just five years, we have experienced three distinct spikes in global energy prices. The first came in 2021, when Brent crude doubled in the wake of the post-Covid economic reopening, briefly touching $85 a barrel. Then came Russia's invasion of Ukraine in 2022, which pushed crude oil to nearly $140 and sent European natural gas to record highs after the abrupt interruption of Russian pipeline supplies. And now, for the third time, we are facing a new, larger shock, this time linked to the conflict with Iran and the closure of the Strait of Hormuz. One wonders: when will the world learn?

What are the most immediate economic consequences of this latest shock?

The most acute risk is stagflation—that toxic combination of weak growth and rising inflation—for energy-importing regions like Europe and Asia. We've been there before. The energy shock linked to the war in Ukraine pushed eurozone inflation above 8% in 2022 and brought growth to almost zero in 2023. Today, we're seeing the same dynamics resurfacing. Crude oil has been trading above $100 for over two months, and there are growing shortages of specific refined products like diesel for road and marine transport, or aviation kerosene. The concept of "demand destruction" has returned to the forefront, and the airline industry is the most eloquent example: the doubling of jet fuel prices in Europe and Asia is already forcing airlines to cancel routes that have simply become uneconomical.

How long will it take for the situation to normalize, even assuming a rapid diplomatic solution?

Even in an optimistic scenario—in which the US-Iran conflict is resolved shortly and the Strait of Hormuz reopens within days—the disruptions to global supply chains will take months to unwind. We're talking about oil, natural gas, fertilizers, sulfur, and aluminum—all critical inputs to the global economy. The damage to growth and inflation for the rest of 2026 has, frankly, already been done. The global production deficit amounts to about a billion barrels of oil, equivalent to about ten days of total world production. This isn't something you can recover from overnight.

What structural lessons should Europe draw from this recurring vulnerability?

There are two key conclusions. The first concerns energy independence. After drastically reducing its dependence on Russian gas starting in 2022, Europe now faces a new vulnerability, this time in refined petroleum products, particularly diesel. This is a surprising fact: only 50% of the diesel consumed in Europe is actually refined on European soil. The continent is therefore heavily exposed to exports from Gulf refineries. Since Europe will not build new refining capacity, the logical path is to reduce diesel demand, and this means accelerating the transition to battery-electric and hybrid vehicles, for both passenger cars and light commercial vehicles.

The second conclusion concerns the electricity mix. Greater diversification of electricity generation sources, reducing reliance on natural gas, is now essential. In the European Union, 71% of electricity generated in 2025 already came from low-carbon sources—nuclear, wind, solar, and hydroelectric—and this share will continue to grow. Europe must accelerate investments in nuclear power, renewable infrastructure, and, crucially, industrial battery energy storage to mitigate the intermittency of solar and wind power. Heat pumps will also play a key role in progressively reducing demand for gas for heating. Taken together, these investments will substantially improve the European economy's resilience to future shocks in fossil fuel supply.

And what does all this mean for investors? What's your advice for private banking clients?

Our positioning remains clear. We continue to favor investments in European and American energy infrastructure—both listed and private—based on growing energy demand and the growing strategic importance of energy security. Within equity portfolios, we recommend increasing exposure to natural resources sectors, as the supply of raw materials is becoming increasingly geopolitically important globally. Finally, countries rich in natural resources—Canada, Brazil, Australia, and Mexico—stand set to further benefit from the global push to diversify energy and industrial metals sources outside the Middle East. For private banking clients with a long-term horizon, these themes offer both resilience and attractive return potential.