HOUSTON, Texas — A prolonged stalemate at the Strait of Hormuz is reshaping the investment calculus for global energy markets, creating what one major fund manager calls a distinct opening in liquefied natural gas and domestic infrastructure plays. Brian Kessens, senior portfolio manager at Tortoise Capital, argues that the market’s persistent hope for a quick diplomatic resolution in the Middle East is mispricing risk—and rewarding investors who position for a longer standoff.
Kessens, whose firm oversees more than $10 billion in assets, made the case amid a broader equity backdrop that continues to defy gravity. The Russell 2000 is currently on pace to log its 27th record close of the year, yet Kessens contends that pockets of the energy complex remain conspicuously underpriced relative to the geopolitical forces driving commodity values higher.
LNG Emerges as the Preferred Play Over Crude
While oil has traded near $99 a barrel—pulling back from peaks reached several months ago—Kessens believes the more compelling opportunity lies downstream in LNG. European buyers saw natural gas prices spike to fresh peaks just a couple of weeks ago, underscoring persistent demand across the Atlantic. Meanwhile, U.S. liquefied natural gas prices have actually retreated roughly 5% over the trailing 12 months, creating a valuation gap that Kessens views as an entry point rather than a warning sign.
The disconnect between international urgency and domestic pricing, he suggests, sets the stage for significant upside as export capacity continues to expand.
Commodity Surge Hasn’t Overstretched Equities
Addressing whether energy shares have already priced in the commodity rally, Kessens pointed to the raw numbers: crude benchmarks have climbed approximately 24%, gasoline has advanced 21%, and broader energy commodities have surged 38% since the onset of the current conflict. Despite those gains, he maintains that the equity layer has not kept pace.
“Those stocks as well” remain attractively valued, Kessens stated, pushing back against the notion that the sector’s run-up mirrors the underlying commodity spike dollar for dollar. He acknowledged that certain names—citing a 45% year-to-date gain in one broad-market target and strong performances from producers like Diamondback Energy—might make investors hesitant to chase momentum. Still, he cautioned against assuming a pullback is inevitable simply because a stock has posted impressive returns.
The Stalemate Thesis: Why Peace Isn’t Priced In
Central to Kessens’ outlook is a rejection of the consensus narrative. Many market participants, he noted, are building positions around the assumption that a peace agreement will eventually reopen oil flows through the Strait of Hormuz. Kessens disagrees with that timeline.
“We see the situation as a stalemate for longer,” he said, framing the extended gridlock not as a risk to avoid but as a structural opportunity. Companies positioned to capture elevated commodity prices—and to benefit from the volatility that accompanies geopolitical uncertainty—stand to outperform in this environment, he added.
U.S. Infrastructure as a Global Strategic Asset
Beyond upstream producers, Kessens singled out midstream and infrastructure operators, specifically naming Williams, as a critical component of the energy investment thesis. He described U.S. energy infrastructure as strategically indispensable not merely for domestic consumption but increasingly for meeting worldwide demand.
The thesis, as Kessens framed it, rests on tangible assets: reserves and production capacity that represent “value in the ground.” With domestic output continuing to grow and international buyers seeking reliable supply alternatives, that in-ground value is becoming “increasingly valued” on a global scale, he concluded.
For investors weighing whether the energy trade has run its course, Kessens’ message is clear: the geopolitical math hasn’t changed, the infrastructure buildout is accelerating, and the market is still underestimating how long the current equilibrium will hold.
