GS Utilities Daily: European Utilities: Hormuz re-opening: what to do with the sector // WindEurope calls for binding 2040 renewables goal

Research evidence excerpt

GS Utilities Daily: European Utilities: Hormuz re-opening: what to do with the sector // WindEurope calls for binding 2040 renewables goal

Goldman Sachs GS Utilities Daily

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European Utilities: Hormuz re-opening: what to do with the sector

At the start of the Middle East conflict, Utilities initially outperformed as investors

turned to defensive and renewables exposure, but growing fears over rising interest

rates and cost of capital subsequently drove sector underperformance, which a

potential peace deal could briefly extend as markets rotate toward Hormuz re-opening

beneficiaries. However, we believe such a scenario would de-risk the sector, and create

selective attractive entry points to gain exposure to an industry that is undergoing a

profound secular transformation, underpinned by five drivers: (1) positive power

demand growth since 2025, fueled by electrification; (2) growing empirical evidence of

accelerating datacenter build-out in Europe; (3) a widening electricity infrastructure

deficit from ageing grids and plant retirements; (4) €2.5-3.5 trn of investment needs

over the coming ten years, on our estimates, versus €1.5 trn over the past 10 years; (5)

record-high US renewables IRRs of 10-11%. Together, these dynamics support an