Spanish investors have doubled their investment in oil and gas since the start of the conflict with Iran

Spanish investors have doubled their investment in oil and gas since the start of the war with Iran. Despite the uncertainty, there has been no panic in the markets, but rather an increase in interest in capitalising on opportunities in the energy sector, especially in commodities such as crude oil and natural gas.

The conflict in the Middle East has instigated a significant surge in Spanish investors’ interest in oil, gas, and other commodities. Far from panic, brokers observe that whilst a degree of nervousness persists, there is no capitulation, and investment in these assets has, in fact, doubled. Commodity trading has expanded considerably, evidenced by increases in both volume and capital deployed.

Energy ETFs have experienced particularly high demand, notably among more seasoned investors, although financial institutions caution regarding their complexity and inherent risks, given that many operate with derivatives whose prices may diverge from the prevailing market price. Nevertheless, several of the most actively traded products are linked to oil and gas, reflecting an opportunistic strategy in view of the geopolitical landscape.

Oil has emerged as the most sought-after asset, propelled by expectations of price escalation and significant volatility. Furthermore, gas also presents a concern owing to escalating prices and potential supply disruptions, particularly in Europe, which is more acutely affected than the United States. Overall, the energy crisis is intensifying investment activity and underscoring Europe’s vulnerability concerning these resources.

Manuel Velazquez, Partner at ERA Group, monitors global prices to manage margins for companies at ERA and has been experiencing moments of tension for weeks due to the impact that rising fuel or gas prices could have on various industries. “We are seeing price scenarios that could be concerning” in the case of gas, he acknowledges, since in the best-case scenario, prices will remain above 40 euros per MWh, which is 20% higher than pre-war levels. Qatar Energy has already acknowledged that it will take between three and five years to restore production at its Ras Laffan plant, which accounted for 17% of its production capacity and met 3% of global demand for LNG (liquefied natural gas), explains the expert, who points to Italy as the country most affected. It has not prepared sufficiently, as Spain did, following the outbreak of the war in Ukraine to reduce its dependence on foreign sources.

The current price crisis, "is affecting Europe much more - with gas six times more expensive - than the U.S, eflecting our geostrategic weakness in energey" [Manuel Velazquez, Partner at ERA Group]