The Geopolitical Volatility Play: Defense and Energy Investments in an Era of Prolonged Conflict

The Ukraine-Russia conflict, now entering its fourth year, has evolved into a protracted stalemate, with Moscow’s intransigence in peace talks and relentless military advances ensuring prolonged instability. This environment of unresolved tension and escalating violence creates a dual opportunity for investors: in defense equities shielded by rising global security spending, and energy infrastructure plays fueled by the urgent need to diversify away from Russian hydrocarbons. The key lies in identifying sectors insulated from sanctions yet positioned to capitalize on geopolitical risk premiums.

Defense: The Counter-Drone and Cybersecurity Surge

The war has become a testing ground for 21st-century warfare, with drones like Russia’s “Lancet” and cyberattacks dominating the battlefield. As Kyiv scrambles to counter these threats, global defense budgets are surging. The U.S. Department of Defense, for instance, allocated $15 billion in fiscal year 2024 to counter-unmanned aerial systems (C-UAS), a figure likely to grow as allies follow suit.

Investors should prioritize companies with proven capabilities in drone defense, such as Raytheon Technologies (RTX), which supplies C-UAS systems like the Coyote Counter-UAS, and L3Harris (LHX), a leader in electronic warfare and radar technology. In cybersecurity, firms like CrowdStrike (CRWD) and Palo Alto Networks (PANW) are critical to protecting energy grids and military networks—a vulnerability underscored by repeated Russian cyberattacks on Ukrainian infrastructure.

Energy: The LNG and Diversification Imperative

Russia’s war has shattered the illusion of energy interdependence. Europe’s scramble to replace Russian gas has supercharged demand for liquefied natural gas (LNG) infrastructure, while the U.S. and Middle Eastern producers are capitalizing on the shift. The International Energy Agency warns that without new investments, global energy security will remain precarious—a risk premium already priced into select equities.

Cheniere Energy (LNG), a leading U.S. LNG exporter, benefits from Europe’s reliance on alternative suppliers. Similarly, pipeline operators like Kinder Morgan (KMI) are critical to moving U.S. oil and gas to global markets. In renewables, NextEra Energy (NEE) and Vestas Wind Systems (VWS) are key to decarbonization efforts that reduce reliance on fossil fuels—a parallel strategy to energy independence.

Navigating Sanctions and Volatility

The rub for investors is avoiding exposure to Russian assets or firms vulnerable to secondary sanctions. Instead, focus on companies with no direct ties to Moscow yet positioned to profit from the conflict’s ripple effects. For example, General Dynamics (GD), a U.S. defense contractor, or Thyssenkrupp Marine Systems, which builds German submarines for NATO allies, offer geographic diversification without sanctions risk.

The Call to Action

The conflict’s unresolved trajectory ensures sustained volatility, but it also guarantees demand for defense resilience and energy security. Investors who allocate to these sectors now—while volatility remains elevated—position themselves to profit as governments and corporations double down on preparedness. The stakes are existential for Ukraine, but the opportunities are global.

In this age of perpetual crisis, the most intelligent investments are those that turn geopolitical instability into profit. Act swiftly—the next phase of this conflict will reward the bold.

Data as of May 2025. Past performance is not indicative of future results. Always conduct due diligence before investing.