The World Energy Outlook 2025 shifts the focus to energy security rather than climate. Political pressures, geopolitics and impacts on markets: what is changing
Sometimes, words matter more than anything else. This is the case of the World Energy Outlook, the annual report published by the International Energy Agency (IEA), the fixed appointment for analysts and governments as a compass on the latest global trends. In these publications, it is not just the numbers that count, but also and above all the relevance given to the topics and the choice of words with which they are presented. The underlying theme of the 2025 edition – made public on 12 November – is undoubtedly energy security. In his preface, executive director Fatih Birol identifies it as the main challenge of our times, since energy is now a weapon in the contest for global hegemony: “never before have tensions involved so many sources and technologies at the same time”, he wrote.
Only at the end of the intervention does the fight against climate change find space, which according to Birol himself is receiving less and less attention on the international political agenda. In fact, the repositioning, certainly not limited to the IEA, is clear in the numbers. This year the expression “energy security” appears 92 times, on average every four pages (excluding tables). Never so many in the last decade, outside of 2022 when the Russian invasion of Ukraine forced the European gas crisis at the center of political agendas. At the same time, the frequency of references to climate change in IEA reports has significantly reduced. The expression “climate change” appears 42 times in the 2025 edition, one of the lowest figures in recent years. There were 96 citations in 2015, 135 in 2016, 90 in 2017. Although far from a real text analysis study, these numbers suggest a change in priorities for the Paris-based agency and for the entire ecosystem of professionals and political decision-makers.
The change in tone and focus of the International Energy Agency is the result of the changed geostrategic context. The closed taps of Russian gas to Europe, the sabotage of gas pipelines and other infrastructures, the Chinese measures to control the export of rare earths, the Western sanctions on Russian crude oil: these are all events that have marked the international energy market, on which policies have an increasingly greater weight. But it is undeniable that politics itself is now also entering the debate of international organizations and think tanks. It is no mystery that the American administration subjected the IEA to considerable pressure to abandon its most incisive positions
on global warming and instead bring attention to the safety of energy supply chains. Several members of the Republican Party had threatened in recent months to cancel American funding for the agency. The same
US Energy Secretary Chris Wright called the IEA’s estimate of a peak in oil demand before the end of the decade “complete nonsense” – held until the 2024 report. The pressure worked: from
this year the IEA returned to publish the results of an old model, abandoned in 2020 driven by environmental campaigns. This starts from the hypothesis of a freezing of current energy policies for the next 25 years (and therefore the absence of any progress). In this case the agency predicts that the demand for oil and gas, instead of falling, will continue to rise well beyond 2050. Although in the same report the IEA also published other less drastic results – the result of different models – the political significance of this forecast is evident.
Furthermore, the 2025 report makes it clear that, even in the most optimistic (and currently unrealistic) scenario of net zero global emissions, further investments in fossil fuel extraction and refining plants will be necessary. In particular, to counteract the loss of efficiency of oil and gas fields and some plants, such as liquefied gas terminals or thermoelectric power plants, and thus guarantee a safety margin for the energy system during the transition. Very different tones from those of 2021, when director Birol declared that “if governments are serious about the climate crisis, they cannot carry out any new investments in oil, gas and coal from now on”. However, the focus on security is not in itself antithetical to the efforts needed to combat and mitigate climate change. The resilience of networks, the autonomy and price stability offered by renewable sources and nuclear are key elements of both the transition and energy security. The two objectives go together: climate change cannot be addressed without guaranteeing system security, energy security simply remains a mirage without keeping global warming under control.
Stock markets
On the other hand, these companies have not recently shown significant outperformance on average despite very positive earnings revisions and significant contributions to aggregate growth. It seems that the gains on the AI front have moved towards more cyclical, higher beta and generally more speculative areas. The underlying conditions remain supportive, with Big Tech investment spending seemingly never stopping and consequent positive impacts on suppliers. We continue to believe that these investments are largely justified by visibility and progressive acceleration in demand, with margins consistently higher than expectations which imply satisfactory average returns over the cycle. However, some dynamics must be kept under close observation, especially regarding the increase in debt and the finance lease component, as well as the management of amortization costs. In
Europe, global large caps seem to be contributing to the rise again but the banks continue to lead. International exhibitions still seem weak and burdened especially by sectors such as cars and chemicals. At the same time
some issues such as defense have been blocked for some time. In the emerging universe, more cyclical markets have outperformed this year. The most penalized was India, historically much more expensive and generally outside of the issues
with more momentum. China has improved its growth profile and return on invested capital, with a valuation gap that has narrowed but remains large and can provide good support.
Bond markets
The heterogeneity of the sources used makes it difficult to independently validate this process which, however, in the absence of anything else, must be considered worthy of attention. Statistics from private sources, or from individual states, on the food market
work do not give signals consistent with the above, indeed in a big picture of substantial stability there are more negative surprises than positive ones. While waiting for the publication of the most relevant statistics to resume, let’s keep for the
USA a scenario of moderation in economic activity such as to validate the current expected rate reduction path. Fed Funds Futures price less than one cut for December 2025 and another 2 for 2026. The main theme is related to the labor market, even if inflation has risen again. With a “final” implicit rate of around 3% (in line with expectations
of the FED), if the labor market does not deteriorate markedly, the movement on short-term rates could be exhausted. In Europe it is priced at less than half a denomination between now and the end of 2026, probably more as a precautionary measure on the part of the market. The rather balanced risk balance allows the Governing Council to have
still a more wait-and-see approach linked to the evolution of the data. As regards the corporate credit sector, sustained inflows, especially on euro paper, with volumes in the area of +10% since the beginning of the year both on Investment Grade and on the riskier High Yield. In the dollar area, positive flows in the +6% area since the beginning of the year, accelerating on Investment Grade, while in moderate decline since October on High Yield.
Currency markets
This appears to be a phase of weakness for the yen, waiting for the position of the Bank of Japan (BoJ) to be clarified. However, it should be remembered that in the recent past the Japanese Institute has been more accommodating than other central banks with respect to the observed increase in inflation. The election of Sanae Takaichi as Prime Minister has reawakened expectations that Japan is preparing to experience a second dose of “Abenomics”, i.e. expansionary fiscal monetary policy and structural reforms. This weighed on the exchange rate, causing the yen to weaken. There may soon be a phase of continuing weakness in the yen while waiting for the political situation to clarify. It is not excluded that BoJ could somehow accommodate the government’s wishes with increases in the cost of money spread out over time until reaching neutrality, which we continue to believe is the terminal point at which the Japanese rate hike cycle will arrive. Finally, it should be remembered that the weakness of the yen, in addition to supporting inflation, may not be seen well in Washington given that it contributes to keeping the trade surplus with the USA high.
Our lines
The shutdown deprives markets and analysts of the pulse of the situation on the American cycle, and does not allow us to resolve the questions about the US cycle that arise from the co-presence of upwardly revised growth expectations and moderation in the labor market. For the bond market we believe full positioning on duration is appropriate, especially for multi-asset portfolios, to offset the risks associated with investments in shares and credit. Among corporate bonds, we continue to prefer issues with high creditworthiness; Financial sector issues still offer an attractive excess return and therefore continue to be well represented
in wallets. In the relative return range we have significantly reduced exposures to High Yield due to the strong compression of spreads in the segment. As regards equities, the positioning of multi-asset portfolios with benchmarks remains neutral, with margin adjustments decreasing due to the quality growth style and favoring a passive approach. Total return multi-asset portfolios remain more cautious in light of the levels achieved and both geopolitical uncertainty and the possible negative impact of tariffs on growth. For currencies, the total return multi-asset portfolios kept their currency exposure unchanged. For benchmarked multi-asset portfolios, we have reduced the underweight to USD for closer proximity to fair value areas. Some multi-asset portfolios have investments in raw materials, through different strategies also depending on the respective risk and return objectives.
