The next bull market runs on oil and coal

March 31, 2026 (MLN): The global investment landscape is undergoing a "Suez moment" as the traditional 60/40 balanced portfolio fails to protect capital against a structurally inflationary environment.

According to a recent report by Gavekal Research, investors must urgently pivot toward a "heads I win, tails I don't lose" strategy centered on energy.

The report suggests that the most resilient plays in the current crisis are oil refiners, as "crack spreads" the profit margin for refining crude are expected to remain elevated even if hostilities cease.

This is largely due to the physical destruction of major refining infrastructure across Saudi Arabia, Kuwait, and Israel in the past three weeks.

Furthermore, investors are advised to seek out oil producers in politically stable regions like Canada, Brazil, and Colombia to avoid the looming threat of windfall taxes and price controls in the U.S. and Europe.

The shift toward energy is driven by the collapse of three long-standing geopolitical assumptions: the absolute liquidity of U.S. Treasuries, the U.S. Navy's control of global sea lanes, and the role of the U.S. as a benevolent hegemon.

With the Strait of Hormuz blocked and modern navies neutered by cheap drones, energy security has replaced financial reserves as the primary concern for nation-states.

This "Energy Quandary" is forcing a return to coal as the fastest short-term fix for power stability, particularly in East Asia where natural gas inventories have dwindled to just 10 days of consumption.

While this return to "dirty" energy is politically difficult, the alternative of mass brownouts is considered political suicide.

Amidst this turmoil, a potential rapprochement between Presidents Trump and Xi Jinping offers a "silver lining" for specific tech and commodity sectors.

 As the U.S. grapples with rising electricity demand for data centers, tariffs on Chinese solar panels and battery manufacturers like CATL and BYD are expected to "melt away".

The following table outlines the specific investment actions recommended by to adapt to this unfolding reality:

Strategic Energy and Commodity Allocations

With energy currently representing less than 4% of the S&P 500 down from over 15% in the early 1990s the transition from "virtue-signaling" to a genuine energy policy will likely trigger a massive re-allocation of global capital.

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