Amid geopolitical shocks and rising electrification demand fuelled by the rise of new technologies, the debate around energy has experienced a transformative shift, notes Roberta Caselli, Commodities and Investment Strategist at Global X. Policymakers are no longer simply concerned with the carbon footprint of energy sources, but with their security and reliability. The energy market has found itself at the intersection of previously unrelated themes, serving as “an important transmission channel between geopolitics, inflation, industrial policy and long-term structural themes.”
Based in New York, Global X is a leading provider of thematic investment insights, and Caselli brings years of experience providing analysis of key commodity markets. In the latest edition of Sessions, she sits down with Aureon to explore how supply shocks and new technologies are reshaping the energy transition, and how energy security may prove to be the focus for government, businesses and investors alike in the coming years.
The inflation alarm bell
With ongoing conflicts in the Middle East threatening key hydrocarbon transit points, the near-term energy story remains firmly tied to oil and gas for consumers and investors alike. In the long-term, however, the global energy system is becoming increasingly electrified.
Energy markets can transmit geopolitical shocks into the wider economy through prices for crude, refined products and liquefied natural gas. Disruptions to supply can feed into inflation expectations, influence assumptions about central-bank policy and alter broader risk sentiment. That means an energy shock does not need to persist indefinitely to have an impact on financial markets.
“Even when the immediate fear eases, when cargo flows potentially improve or when diplomatic headlines suggest de-escalation, the broader point is likely to remain that energy markets are still vulnerable to choke points, shipping disruption and regional security risk,” she explains.
And governments are taking note, as efforts to ensure energy sovereignty accelerate around the globe. “This is how fossil fuel dynamics might further incentivise the energy transition discussion, because oil and gas appear to remain the market’s inflation alarm bell,” says Caselli.
The short-term focus on hydrocarbon supply shocks and a long-term focus on electrification have created a paradox at the centre of the current transition, Caselli notes. That said, the solution is already clear: “these disruptions are likely to reinforce the long-term case for energy sources that are more domestic, more diversified and less exposed to strategic shock points.”
For investors, this suggests that the energy transition cannot be viewed simply as a linear substitution away from fossil fuels. Security considerations can themselves become a driver of investment in alternative sources of power.
Security is the new green
Energy security has historically played a powerful role in shaping policy, and that history is relevant to the current revival of interest in non-traditional energy sources.
The 1970s oil shocks offer one precedent. According to Caselli, those disruptions helped contribute to reactor development in countries such as France. Today, a different set of disruptions – Russia’s invasion of Ukraine and the Iran war – has prompted the market to return to the same key question: how can countries secure reliable energy supplies while also pursuing decarbonisation?
Nuclear is one clear beneficiary of this shift, Caselli notes. “Energy market disruption has encouraged some policymakers to reassess the potential role of nuclear power within a more secure, diversified and low carbon energy system.”
The energy demands of new technologies, including artificial intelligence (AI), have made nuclear even more attractive, she says. “As AI, data centres, and infrastructure expand, access to secure and affordable power is becoming a strategic consideration.”
The uranium supply chain
The renewed importance of nuclear power also brings a less visible issue to the foreground: the security of the nuclear fuel cycle.
While nuclear can provide large-scale, reliable power supply, securing the technology and resources required for every step of the process – including mining, milling, conversion, enrichment and fuel fabrication – becomes key.
For investors, that means the nuclear opportunity extends well beyond reactor developers to encompass the infrastructure required to extract, process, enrich and ultimately deliver fuel.
However, it also means that the vulnerability begins with supply and demand.
“Historically, mined uranium production has fallen below reactor requirements, with the gap filled by inventories and secondary supply,” Caselli observes. “If reactor requirements rise and investment in new supply does not keep pace, deficits could widen over time.”
Against this backdrop, two other important considerations are supply concentration and strategic risk, she points out. “Uranium mining is geographically diversified in terms of reserves although actual product production is concentrated … Kazakhstan and Canada are the main producers, with Russia and China representing a large share of global enrichment capacity.”
For Western countries, building alternative sources of conversion and enrichment could consequently become as much a security priority as a commercial one, as “new enrichment and conversion capacity together with domestic supply chain development could become strategic priorities for Western countries.”
That also changes the way investors might interpret uranium-market signals. Spot prices can be volatile, but utilities typically plan around multi-year procurement cycles.
“The market has also already seen increased interest in long-term uranium contracting,” Caselli notes. “I’d say that here the term market may sometimes provide a stronger signal than the spot market because utilities typically operate through multi-year fuel procurement cycles. While uranium spot activity may cool in the near term as momentum fades, longer-term demand may remain more consistently linked to reactor life extensions, restarts, new builds, small modular reactors and the broader energy security policy.”
The distinction reinforces a broader point: some of the most important developments in the energy transition may play out gradually through infrastructure and procurement decisions rather than through day-to-day commodity-price movements.
Integration, the quiet bottleneck
Generating more electricity is only part of the challenge. The system also needs to deliver that power when and where it is needed.
“Meeting demand for cleaner and more reliable electricity is likely to require a combination of technologies. Nuclear energy can contribute reliable baseload generation and fuel cycle resilience, while renewables and in particular solar may provide scalable, potentially lower-cost capacity growth,” Caselli suggests.
However, “the expansion of storage capacity and grid infrastructure may also be important for integrating these sources and supporting system reliability.”
This is where the energy transition becomes an infrastructure story. A new solar farm or nuclear reactor adds generation capacity, but transmission networks must connect that generation to consumers. Meanwhile, storage must help balance differences between supply and demand, and grid infrastructure has to accommodate new patterns of electricity use created by electric vehicles (EVs), buildings and data centres.
“Battery storage and grid infrastructure may improve system flexibility and delivery,” Caselli observes. “In this context, the energy transition may increasingly involve a broader rebuilding of the power system.”
“Batteries can help shift generation from midday into evening demand periods and support grid stability … and help make intermittent renewable generation more usable for the grid.”
The increase in energy storage over the coming years is expected to be significant, as shown in the graph above. The EU, for instance, has outlined a target of 200GW in energy storage by 2030, up from 55GW in 2026. On a global scale, BloombergNEF has estimated that energy storage could jump 17-fold by 2035 to 3.8TW.
What to watch
The fundamental demand case for a larger electricity system may be relatively clear, but the bigger uncertainty for investors is how quickly and efficiently the infrastructure can be built.
Caselli notes the risks. “Nuclear projects can face long development timelines and cost overruns, while renewables can be exposed to policy uncertainty and interest-rate sensitivity.”
That means the most important risks may increasingly be execution, financing and policy rather than the existence of demand itself.
For investors, this argues for looking across the energy system rather than focusing exclusively on individual generation technologies. Reactor construction, uranium supply, enrichment capacity, solar deployment, battery storage and grid infrastructure each represent different points in the same structural transition, with different risk profiles and different time horizons.
“The broader structural direction appears to remain supported by rising power demand and continued policy focus on cleaner and more secure energy systems.”
Caselli outlines three signposts for the market.
“First, energy markets appear to remain a potential source of macroeconomic risk, with disruption to oil, gas and shipping still able to affect inflation and sentiment and central banks’ expectations.
“Second, the energy system is expected to become increasingly electricity-led, supported by demand from areas such as EVs, data centres, buildings and broader industry.
“Third, and most importantly, nuclear and renewables can play complementary roles and appear central to the long-term energy shift.”
Rather than one technology emerging supreme, it is likely that tomorrow’s energy landscape will involve a larger and more complicated system in which nuclear provides reliable generation, renewables provide scalable capacity, storage provides flexibility and grids connect the entire structure.
The question, then, is whether enough investment can flow into the broader system quickly enough to meet rising demand while reducing its exposure to the geopolitical and supply-chain risks that have made energy such a powerful force in markets.
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