Energy Stocks Undervalued Amid Hormuz Stalemate, Says Tortoise Capital’s Brian Kessens

LEAWOOD, Kan. — While major market indices reach new heights, energy stocks remain undervalued and present a unique opportunity as a prolonged Hormuz stalemate continues to impact global oil markets, according to Brian Kessens, senior portfolio manager at Tortoise Capital.

As the broader market rallies—with the Russell 2000 recently pacing for its 27th record close of the year—investors are searching for sectors that have not yet been entirely picked over. Kessens, who manages more than $10 billion in assets under management, identifies the energy sector as a prime area for value, specifically pointing to the ongoing geopolitical friction in the Middle East as a catalyst for specific commodity plays.

While oil prices have hovered near $99 a barrel in a row off recent peaks, Kessens suggests that Liquefied Natural Gas (LNG) is currently a more attractive investment than crude oil. He notes that while the prices Europeans are paying for natural gas peaked a couple of weeks ago, the U.S. LNG market has seen a different trajectory, dipping 5% over the past year. This divergence creates a compelling entry point for investors looking at global energy demands.

Addressing concerns regarding market valuation, Kessens pushed back on the idea that energy equities are overvalued despite the rapid ascent of underlying commodities. Market data shows crude benchmarks up 24%, gasoline up 21%, and a broader 38% surge in energy commodities since the start of the war.

Despite these massive underlying commodity gains, Kessens maintains that the stocks themselves are not overextended. He points to broader market comparisons, noting that while certain broad market targets have gained 45% year-to-date, energy-specific equities like Diamondback Energy have also surged significantly, proving the sector’s resilience.

The core of Kessens’ bullish thesis on energy relies on challenging the market’s current pricing assumptions. Many investors are operating under the assumption that a peace agreement in the Middle East is imminent. However, Kessens views the situation in the Strait of Hormuz as a “stalemate” that will likely persist for the foreseeable future.

“We see the situation as a stalemate for longer, which is an opportunity for those companies,” Kessens explained, noting that a prolonged standoff allows energy firms to capitalize on higher commodity prices and benefit from ongoing market volatility.

Looking beyond immediate commodity trading, Kessens emphasized the long-term strategic value of U.S. energy infrastructure, specifically highlighting companies like Williams. He argues that domestic energy infrastructure is vital not only for U.S. needs but increasingly for global energy security.

According to Kessens, these infrastructure assets represent immense “value in the ground.” With growing production capabilities that serve both domestic consumption and international export markets, U.S. energy infrastructure remains a highly strategic and increasingly valued asset class in a volatile global economy.