Investing in the energy sector

Energy sits at a complicated intersection of old systems and new ambitions. Oil and gas remain global workhorses. Solar and nuclear solutions are building momentum across markets. Utilities sit in the background, keeping the entire system running. Each part responds differently to price swings, policy changes and global events.

Oil and gas companies still dominate global supply, yet utilities, pipeline operators and renewable developers shape how energy reaches homes, industries and data centers. These groups operate with different constraints and opportunities. Some focus on steady transport volumes, while others depend on global commodity prices or long project cycles.

If you’re considering investing in energy, there are a few routes you can take. You could gain exposure to companies in the industry via stocks, exchange-traded funds (ETFs) and bonds. Some investors also opt for exposure to different types of energy commodities, like crude oil and natural gas, through ETFs and futures. Here are some things to consider before you jump in.

Shifting dynamics in global energy

Every part of the global economy needs energy to function. Factories, transportation networks and digital services all depend on steady supply. Even as renewables gain ground, total energy demand continues to rise.

Our 2026 Outlook highlights that energy is no longer only an economic topic. It has become a strategic resource for national security and technological competitiveness. Access to reliable energy now shapes decisions across manufacturing, data infrastructure and domestic supply chains.

This framework explains why investors and policymakers continue to track the balance between supply and demand closely. In an environment where energy is tied to economic resilience and geopolitical stability, small changes in production or consumption can ripple widely.

Energy is a cyclical industry

Energy cycles tend to follow broader economic trends. During growth periods, companies consume more fuel and electricity. During slowdowns, consumption lessens, which affects prices and company earnings. Because of this dynamic, the sector often acts more cyclical than others.

This cycle applies not only to consumption but also to company behavior. When prices rise, producers tend to invest more in drilling and development. When prices fall, spending often contracts. Large projects require years to complete, so decisions made today can influence supply many years later.

As such, “Holding supply constant, the worst time to invest in the sector is when we are on the verge of a coordinated global economic slowdown,” said Christopher Baggini, Global Head of Equity Strategy for J.P. Morgan Wealth Management. On the flip side, he believes the best time to consider investing in the industry is typically when the world is experiencing “economic improvement or revised economic growth,” he noted.

The 2026 Outlook adds another layer to this cycle. Climate pressures, more frequent weather disruptions and new regulatory requirements can increase input costs and complexity for energy systems. These forces raise the stakes for both producers and consumers as they navigate future cycles.

Supply and demand still set the tone

Global supply and consumption remain the primary drivers of commodity prices. Exporting countries adjust output based on domestic priorities and global conditions. Importing regions adjust demand based on economic activity and policy.

Europe’s experience over the past few years illustrates how quickly supply dynamics can shift. The region rapidly reduced its dependence on Russian natural gas and expanded liquified natural gas imports in response to Russia’s invasion of Ukraine. The European Union is now on track to buy hundreds of billions of dollars of U.S. energy through 2028 as it moves toward phasing out Russian supplies. At the same time, European households have faced sizable increases in electricity bills since 2021 as markets adjusted to new supply routes.

These shifts show how energy markets are influenced not only by prices but also by politics, supply chain pressures and security concerns.

AI’s impact: The new engine of power demand

The artificial intelligence (AI) revolution stands out as a defining force for energy. Data centers rely on constant electricity to train models, run applications and store information. As AI tools spread across industries, companies are building more facilities and expanding existing ones.

U.S. data center electricity demand is projected to surge from 25 gigawatts in 2024 to over 80 gigawatts by 2030, pushing its share of national electricity consumption from 4.4% to nearly 12%. As more companies build data centers and expand cloud infrastructure, the grid will feel the pressure. By 2030, power demand is projected to grow by more than the total current annual electricity production of Texas and California combined.

Regardless of long-term developments in renewables or energy policy, this growing digital load is something that utilities must prepare for now. Regional power markets in the U.S. already face long queues for new generation, and about 70% of these markets show signs of strain. Much of the U.S. power transmission system is more than 25 years old. This aging infrastructure contributes to regional bottlenecks and increases the risk of supply interruptions as electricity demand grows.

Renewables are rising, but it’s not a rapid transition

Renewable energy capacity continues to expand across wind, solar, hydro and nuclear. Many states and corporations have set ambitious targets for clean energy usage. The timing of these additions varies, but momentum is clear across both public and private projects.

Even with this growth, traditional energy sources remain important. Natural gas plays a central role in meeting the needs of data centers because gas plants offer reliable baseload power. Natural gas now accounts for about 40% of U.S. electricity generation.

However, given that a new gas turbine can take about four years longer to build than some renewable projects, our strategists expect natural gas and renewables to work together to support rising digital demand in the coming years.

The bottom line

Energy sits at the center of economic growth, national security and the AI transition. Traditional forces such as supply, demand and geopolitics still shape the sector, but new pressures have emerged. AI is increasing electricity demand far faster than past forecasts. Power grids are aging, and regional markets face long queues for new generation. Renewables continue to rise, but natural gas remains essential for supporting the rapid expansion of data centers. These trends help explain why energy remains a critical link between technology, infrastructure and global geopolitics.

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