Thummel: Energy Volatility Hinges on Strait of Hormuz Traffic, Investing in Infrastructure

• Oil volatility is expected to persist due to geopolitical uncertainties, with a substantial risk premium currently embedded in prices.
• Oil prices could fall into the $80s if the Middle East ceasefire holds and the Strait of Hormuz sees normalized traffic, though this is still months away.
• The energy sector is the best-performing in the S&P 500 this year, and investors are generally under-invested, with a recommended allocation of up to 10%.
• Energy security is a competitive advantage for energy-rich nations, and energy infrastructure offers attractive attributes like high dividend yields and free cash flow yields due to its resilience and difficulty of replacement.

Rob Thummel discusses the current volatility in oil prices, attributing it to geopolitical uncertainties like the Middle East ceasefire and Strait of Hormuz traffic. He anticipates oil prices could settle in the $80s if compliance holds. Despite current high prices, he sees significant opportunities in the energy sector, particularly in energy infrastructure, which he believes is under-allocated in investor portfolios.