Oil prices remain high as the Iran war continues to affect the vital shipping lane, the Strait of Hormuz. With attacks on energy infrastructure across the Gulf and supply routes fragile, it is important to consider how to protect the UK’s energy system from the impact of conflicts.
David Harrison, head of sustainability at Rathbones Asset Management, says: “Insulating the population from oil price shocks needs a long-term and balanced approach to energy infrastructure policy, including doubling down on clean energy commitments and investment in smarter, more resilient electricity systems.
Decarbonisation and energy security are often framed as opposing forces, but this is a narrow and short‑term reading of the challenge. In reality, sustained investment in low‑carbon, domestic energy sources is central to building energy systems that can withstand both climate impacts and fossil fuel price shocks. The Climate Change Committee’s advice alongside the UK’s seventh carbon budget made this clear: fossil fuel price spikes have triggered around half of UK recessions since 1970, underlining just how exposed the economy remains to volatile global markets.
“UK consumers are particularly vulnerable because the national wholesale electricity market operates on a marginal pricing approach. The price for all electricity in each period is set by the most expensive generator needed to meet the final unit of demand, which is almost always a gas-fired power plant due to the flexibility of this type of generation. This means that even when the grid is dominated by low‑cost renewables, household bills remain closely tied to global gas prices.”
Reducing the frequency with which gas sets the marginal price is essential. Measures such as the uptake of electric vehicles, distributed storage, AI‑enabled grid optimisation and better harnessing of periods where supply outstrips demand all contribute to a more resilient, more affordable energy system capable of accelerating wider decarbonisation.
Harrison continues: “Within our sustainable funds, the energy transition remains one of the most critical global challenges. There is no quick fix: transforming energy infrastructure requires long‑term planning, thoughtful policy support and well‑executed delivery. This includes adapting transmission and distribution networks, scaling storage technologies and integrating low‑carbon solutions that enhance domestic energy self‑sufficiency.
“Our exposure to energy infrastructure reflects these realities. We continue to hold many of the ‘picks and shovels’ of the transition—from operators like National Grid and E.ON to companies such as Schneider Electric and Quanta Services that are modernising grids and expanding storage. Linde, the world’s largest installer of hydrogen technology, has long been a core holding given its role in helping major energy companies decarbonise their infrastructure.
“Our preference for a balanced energy exposure reflects our conviction that achieving energy security will require a diversified toolkit rather than reliance on any single technology. Often, it is the less glamorous parts of the energy ecosystem that will ultimately drive long‑term system change.
“History shows that energy systems have transformed before. With clear strategy, long‑term investment and a narrative that challenges the outdated assumption that low carbon means high cost, they can do so again building a system that is cleaner, more resilient and more affordable for households, businesses and investors alike.”
Markets on edge? Why diversification is your first line of defence.
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