ClearBridge urges portfolio repositioning as oil crisis looms

Binaya Dahal

Journalist

22 May 2026

ClearBridge Investments Sam Peters has urged investors to reposition portfolios, saying collapsing oil inventories are rapidly eroding the market’s remaining supply buffers and increasing the risk of severe shortages across the global economy.

Peters, portfolio manager at the $200 billion global equity manager, said the ongoing disruption linked to the prolonged closure of the Strait of Hormuz could escalate into outright shortages of key fuels, including jet fuel, in some economies.

“This is one of the largest supply disruptions we have experienced, and the problem is that it is ongoing,” Peters said. “Current estimates are that if the Strait opened today, cumulative unproduced barrels would approach one billion. If this continues until June 1, that estimate jumps to 1.4 billion barrels.”

He said strategic petroleum reserve releases and commercial stockpiles helped cushion immediate supply shocks. But warned that those protections are now nearing to critical thresholds.

“The problem is that we are approaching the point where record inventory draws rapidly erode these crisis shock absorbers, creating the conditions for stress to spread quickly across the global energy supply chain,” he said.

Peters added this dynamic has not been fully reflected in market pricing, arguing that conventional oil price models underestimate the scale of adjustment required once inventories fall to operational minimums.

“It is practically impossible to model the price per barrel required to force demand destruction, especially in markets that simply run out of product, but we can be quite certain the right price will not be US$100 per barrel but will likely be significantly higher,” he said.

He also warned that markets may be underestimating the influence of discounted Russian and Iranian crude in sustaining demand in major importing economies such as China and India, while noting China’s expanded strategic storage capacity could temporarily soften domestic supply pressures.

Furthermore, Peters said investors were too optimistic about recession risk. “We closely monitor these signals and think the current consensus could prove too complacent if the energy crisis intensifies as expected,” he said.

“The risk is that economic stress does not grow in a smooth, linear fashion. As supply chains tighten, product shortages emerge and oil prices rise to force demand destruction, the macro drag could compound quickly, adding another layer of uncertainty to an already fragile energy backdrop.”

Moreover, ClearBridge said it was increasing exposure to oil and gas producers and diversified energy majors. “The most direct reason is that energy is the clearest expression of the risk we see building.”

“If global inventories are approaching hard floors and product stock-outs become more likely, then energy companies should experience materially positive estimate revisions and generate much higher cash flows.

“In an energy-induced volatility spike, we think energy will likely be one of the few truly defensive sectors.”