Geopolitical risks: CAC 40 sectors under pressure, and those that resist

Un baril soutenu par un faisceau de tensions au Moyen-Orient

The Brent fluctuates this morning at $106.46, up 1.80%, extending the rebound seen after falling below $99 on Friday. The barrel had previously reached $120 on April 29, a level that reflects the extent of the risk premium integrated by the oil market.

Several factors are contributing to this tension. Donald Trump is considering a relaunch of an operation to allow ships blocked in the Gulf to pass through the Strait of Hormuz, while France and the UK are considering a meeting with willing countries to contribute to a mission securing the strategic passage. Meanwhile, Washington has announced new sanctions targeting individuals and entities accused of facilitating the sale of Iranian oil to China, particularly through structures linked to the Revolutionary Guards, in Dubai and Hong Kong, ahead of a meeting planned between Donald Trump and Xi Jinping.

The situation in Lebanon remains active despite the ceasefire in effect since April 17: an Israeli bombing in Kfar Dounine reportedly resulted in six deaths and seven injuries, according to the official Lebanese news agency. According to an unverified investigation by the Wall Street Journal, the United Arab Emirates allegedly conducted direct strikes on Iranian oil installations on Lavan Island in early April.

Energy and Oil Sector: Sectors Supported by the Context

A barrel sustainably above $100 could once again mechanically alter the income equation for major oil companies and oil-dependent companies. On the CAC 40, TotalEnergies could emerge as the most obvious candidate with a Brent at $106.46, as its cash flow generation has historically been correlated to the price of oil. Nevertheless, oil availability, refining capacities, as well as logistical chain constraints (including potential lasting restrictions on traffic through the Strait of Hormuz) could negatively impact in the coming weeks.

Among Parisian energy-related companies, players like Technip Energies or Vallourec could potentially benefit from a high-price environment that supports producer investment budgets. The prospect of reinforced American sanctions on Iranian exports to China further tightens the supply-demand equation in the physical market, a parameter closely monitored by energy value chain specialist investors.

This support effect is conditional on the duration and consequences of the conflict (as well as the fundamentals of each company). Friday’s dip below $99, on hopes of diplomatic détente, highlighted the sector’s sensitivity to signals from the Middle East. The real impact of these tensions on energy infrastructure is still to be determined.

Transport, Automotive, and Industrial Sectors: Sectors Exposed to Cost Shock

Conversely, several sectors on the CAC 40 see their profit margins deteriorate with rising fuel costs. The aviation sector, where kerosene represents a major part of operational costs, is among the most exposed, as are logistics groups whose road and maritime transport costs follow the oil price dynamics.

The automotive sector, represented in Paris by Stellantis and Renault, faces two constraints: pressure on household purchasing power due to pump prices and a possible return of strong inflation, which can affect demand, as well as the impact on petrochemical input costs. Energy-intensive industrial companies and chemists are also affected by imported inflation, in a context where a surge in oil prices led to a 2.8% increase in Chinese production prices in April, its biggest rise since July 2022 according to the National Bureau of Statistics (see our dedicated article).

This mechanism of imported inflation also complicates the interpretation of trajectories for major central bank interest rates, a parameter that directly influences the valuation of sectors sensitive to capital costs, such as publicly traded real estate or debt-burdened utilities. The destabilization of Dubai’s reputation as a business and investment hub adds an additional dimension for French companies present in the region.