Shell, TotalEnergies and a little-known French LNG infrastructure business are among the stocks investment trust managers are backing as geopolitical disruption tightens energy markets and forces governments to rethink their approach to energy security.
Three months of disruption to oil and natural gas supplies in the Middle East have materially tightened energy markets, with liquefied natural gas (LNG) exports to Asia and oil products such as diesel and jet fuel among the most affected.
Mark Hume, co-manager of BlackRock Energy & Resources Income Trust, said: "Crucially, the Iran conflict has placed a focus on energy security and countries appear to be evaluating energy policy. Heightened geopolitical uncertainty is reinforcing the strategic importance of secure, resilient energy systems, supporting continued investment across upstream supply, infrastructure and reliability-focused energy assets.
"Capital discipline across the sector remains strong, balance sheets are robust, shareholder returns are attractive, and demand for oil, gas and electricity generation continues to grow. Taken together, we believe this represents one of the most compelling medium-term setups for the energy sector seen in over a decade."
The International Energy Agency recently raised its oil demand forecast and pushed out its expected date for peak demand, a development Thomas Moore, lead manager of Aberdeen Equity Income Trust, said is prompting a re-rating of companies across the sector.
Governments are also recalibrating taxes and incentives to encourage sufficient investment in production capacity, he added, creating a backdrop that favours those companies positioned to benefit from rising capital expenditure.
Sue Noffke, manager of Schroder Income Growth, noted that demand is being driven by urbanisation and electrification in developing economies and by AI infrastructure build-out in developed markets.
A further reason to hold energy stocks is portfolio diversification, said James Ashworth, manager of Brunner Investment Trust.
"Geopolitical shocks, including those seen in the past few years, often result in the price of oil rising while the wider stock market falls," he said, adding that the high cashflow yields available in the oil sector stand out at a time when much of the market offers relatively low dividend and cashflow returns.
Below, investment trust managers give some of their favourite energy stocks amid this backdrop.
Shell
Anthony Lynch, manager of JPMorgan Claverhouse Investment Trust, named Shell as his preferred holding within the energy sector. His focus is on companies that combine disciplined investment with consistent shareholder returns, and he said Shell fits that profile more clearly than its peers.
"We believe Shell remains particularly well positioned due to its disciplined approach to capital allocation, including improving operational efficiency, reducing costs and divesting underperforming assets," Lynch said.
"This has supported stronger shareholder returns through both a growing dividend, which increased by 9% year-on-year in the first quarter, and a countercyclical approach to share buybacks."
Lynch also highlighted Shell's position as a global leader in LNG production as a structural advantage. He described LNG as "an important transition fuel, given its lower carbon intensity relative to other hydrocarbons" and said this should support the durability of Shell's returns over the longer term as the energy system gradually shifts.
TotalEnergies
Rebecca Maclean, co-manager of Dunedin Income Growth Investment Trust, holds TotalEnergies as a play on the energy transition rather than exposure to traditional oil. Every company in the Dunedin portfolio is assessed on its sustainability credentials, with the manager looking for "evidence of real progress rather than just stated intentions".
"TotalEnergies is held as an energy transition company," Maclean said. "We believe its balanced approach across oil, gas, electricity and renewables, combined with disciplined capital allocation, should position it well for a changing energy landscape."
Gaztransport & Technigaz
Maclean also named Gaztransport & Technigaz, known as GTT, as a holding that offers a different route into the LNG theme. The French company's patented membrane technologies are installed in approximately three-quarters of the world's operating LNG carrier fleet, providing it with a dominant market position, high barriers to entry and long-dated order book visibility.
"Geopolitical events in the Strait of Hormuz have, if anything, reinforced the strategic importance of diversified LNG supply and the infrastructure that underpins it," Maclean said. "GTT operates a capital-light model, meaning it earns royalties on its technology rather than owning physical assets, which, combined with a net cash balance sheet, has historically supported attractive returns to shareholders."
Maclean also outlined three time horizons that investors should monitor when watching for risks in the oil and gas sector.
In the near term, the energy sector remains highly sensitive to geopolitical developments, particularly around the Strait of Hormuz, which can cause fast and unpredictable moves in energy prices.
Over the medium term, the pace at which inventories and stockpiles can be rebuilt once production normalises will matter, alongside any lasting impact on trade routes and infrastructure.
For the longer term, she identified capital allocation discipline – specifically if companies have developed a clear and disciplined strategy for delivering growth and returns while managing resilience and transition within the energy system – as the central risk to watch.