MarketsJul 22, 2026
Energy Faces a Two-Front Crisis as AI Demand Meets Geopolitical Disruption
Structural Headwinds
Rhea Lobo
Discover
Energy markets are getting hit from two directions at once. Oil prices have surged ~50% in 2026 as a US-Iran war disrupts Middle East supply. Additionally, a slower-moving but potentially larger crisis is building in US natural gas, driven by AI's surging electricity appetite.
Brent crude briefly topped $95 a barrel this week, up from $71 at the start of July. US forces carried out their 11th consecutive night of strikes on Iran, targeting military operations centers and drone storage facilities. Secretary of State Marco Rubio said Iran "don't seem to be serious" about a deal.
Flows through the Strait of Hormuz have fallen to 5.1M barrels a day, down from 12.5M barrels earlier this month. Saudi Arabia had been rerouting exports through Yanbu, a Red Sea port, as a workaround. That route is now under threat too.
Iran-backed Houthis declared a maritime blockade on Saudi Arabia and warned all shipping companies to avoid Saudi ports.
At least five oil tankers reversed course after the announcement. Saudi Arabia had been exporting roughly 4M barrels a day through Yanbu, and that flow now sits at risk.
"The US is now one strike decision away from having both global energy chokepoints contested simultaneously, and the market, insurance and freight consequences of that scenario are not currently priced in."
Aarathi Krishnan, Raksha Intelligence Futures
Goldman Sachs analysts put Brent on track for $120 a barrel by year-end if Hormuz exports don't resume. TD Securities described the situation as opening the door to "fatter right-tail scenarios the longer it goes on."
Natural gas tells a different story on the surface. Prices are down 8% in 2026, and the US currently produces 110 to 112 billion cubic feet a day. That abundance has kept gas off most investors' radar.
But the Permian Basin, which accounts for roughly 20% of US gas production, just illustrated how fragile that supply picture really is. Gas prices at the region's Waha trading hub averaged negative $2.19 per million British thermal units in the first half of 2026.
In late April, when oil prices neared $100 a barrel, the Waha price hit a record low of negative $7.95. Producers were essentially paying buyers to take the gas because pipelines couldn't move it fast enough.
New pipeline capacity has temporarily lifted Waha prices, but analysts expect relief to be short-lived. Gas production in the Permian tends to grow faster than crude, and more drilling is planned before the next round of pipelines comes online toward the end of the decade.
<finks-ask data-id="ask-1"></finks-ask>
The deeper issue is what happens when AI-driven electricity demand collides with this constrained infrastructure. Matthew Smith, founder and CIO of Chronometer Partners, spent 18 months mapping the natural gas landscape and concluded a shortage is unavoidable by the second half of 2028.
Natural gas represents over 40% of US power generation. The US is also scheduled to export up to 35B cubic feet a day by end of 2030, up from 15B cubic feet today. Smith sees a deficit of more than 5B cubic feet per day before AI demand is even fully counted.
Smith identifies Expand Energy as a clear beneficiary. The upstream producer controls high-quality rock that allows faster, cheaper gas extraction. Range Resources has significant room to grow production, he said.
As gas and electricity prices rise together, Smith expects solar assets to reprice upward. He points to XPLR Infrastructure and Clearway Energy as well-positioned names. Consumers seeking to offset higher electricity bills will likely accelerate solar panel purchases, supporting both companies.
For the longer-dated nuclear buildout Smith says is the only viable solution by 2033 or 2034, he favors large-scale operators like Cameco over smaller players. He also flags BWX Technologies as a primary supplier of nuclear hardware for the US Navy.
On the other side, gas turbine manufacturers like Caterpillar and fuel-cell companies like Bloom Energy could see orders slow as gas gets expensive.
Hyperscalers currently budget ~10% of costs for energy. Smith estimates that figure could climb to 20% to 30% of compute costs by 2029 if gas doubles or triples structurally.
