Underowned, Undervalued And Underestimated – The Oil Breakout No One Is Positioned For

While capital crowds into artificial intelligence, mega-cap technology and record-high equity indices, the global Oil market is tightening in plain sight. Positioning remains historically light. Supply growth is constrained after years of underinvestment. Meanwhile, structural demand – amplified by AI-driven electricity consumption, industrial expansion and transport logistics – continues to grind higher.

The disconnect is striking. Energy equities trade at modest multiples. Futures positioning reflects complacency. And yet geopolitical risk is building, spare capacity is thin and one-third of global seaborne Oil exports still transit through the Strait of Hormuz – a chokepoint increasingly exposed to military escalation. Markets appear priced for stability. But the world looks anything but stable.

A Structural Mispricing Few Are Acknowledging

According to Lars Hansen, Head of Research at The Gold & Silver Club, the current Oil market reflects a classic case of structural complacency.

“What we are seeing is a market anchored to outdated narratives,” Hansen explains. “Traders remain fixated on peak-demand assumptions and Energy transition headlines, while the hard data shows global consumption continuing to rise. At the same time, upstream investment has lagged for nearly a decade. That imbalance does not resolve itself gently.”

The numbers support the thesis. Global Oil demand continues to press toward record levels, even as inventories in key regions sit below long-term averages. Capital expenditure among major producers remains disciplined. Shale growth in the United States is moderating. Outside of OPEC, spare capacity is limited.

This is not the backdrop typically associated with suppressed prices.

The AI Energy Effect

The artificial intelligence boom – widely viewed as a technology story – is rapidly becoming an energy story.

Data centres are among the most electricity-intensive assets ever built. As hyper scale infrastructure expands to power AI models, grid stability becomes paramount. Renewable capacity is growing, but intermittency challenges mean fossil fuels remain critical for baseload reliability.

“AI does not reduce energy demand – it increases it,” Hansen notes. “Every incremental layer of digital infrastructure requires physical energy beneath it. Oil remains embedded across logistics, petrochemicals, transport and backup generation. The market has not fully absorbed that reality.”

The result is a structural demand floor that appears far stronger than consensus projections imply.

Geopolitical Risk Is No Longer Theoretical

With a substantial U.S military build-up underway in the Middle East, Washington has signalled that a decision on potential strikes against Iran could come within days. Oil has already risen more than 5% this week as traders begin to price in the risk of escalation.

The market’s central fear is disruption to the Strait of Hormuz – a critical chokepoint through which more than 14 million barrels per day of Oil and condensates passed in 2025, accounting for roughly one-third of global seaborne exports.

Three-quarters of that flow heads to China, India, Japan and South Korea.

Iran’s Revolutionary Guard has already conducted military exercises in the region, partially closing the strait for several hours. Officials have signalled they are prepared to shut it down if ordered.

“Iran could disrupt Hormuz for far longer than many participants assume,” Hansen warns. “If that scenario unfolds, the repricing in Oil would be aggressive and swift. The risk premium is still far too low.”

History suggests that when chokepoints become unstable, price reactions are not linear – they are abrupt. Traders scramble for exposure. Hedging activity intensifies. Volatility expands. What appears manageable one week can look dangerously under-priced the next.

A Market That May Not Wait

Oil today sits at the intersection of three powerful forces: structural supply constraint, accelerating AI-driven energy demand and rising geopolitical fragility. Each factor alone would justify attention. Combined, they create a market environment where downside appears increasingly limited, while upside risks are growing.

When volatility compresses and narratives dominate, opportunity often hides in plain sight. Oil is currently priced as if geopolitical tensions will dissipate and AI will somehow run on sentiment alone.

History suggests otherwise.

Energy shocks rarely announce themselves politely. They emerge suddenly, forcing capital to chase exposure at progressively higher prices.

For traders seeking asymmetric opportunity – where downside appears limited and upside could be explosive – Oil warrants serious reconsideration.

The world is consuming more energy, not less. Supply growth is constrained. Geopolitical tensions are rising. AI is accelerating demand.

And yet, remarkably, most portfolios remain underweight.

In markets defined by narrative extremes, the biggest opportunity is often the one nobody is talking about – until it is too late.