2025 Market Outlook: BlackRock Energy and Resources Income Trust

At the same time, the mining and energy sectors have looked cheap relative to broader equity markets for some time. In recent months, for example, the BlackRock Energy and Resources Income Trusthas been adding to energy transition companies, taking advantage of volatility after Trump's election win to add more.³ Relative valuations may improve if companies report better-than-expected earnings, which is plausible given stronger-than-expected average prices for most commodities over the medium to long-term.⁴

Demand in mined resources to remain high despite energy transition

There are also longer-term factors driving investment in energy and mining companies. The expansion of artificial intelligence, for example, brings significantly higher energy needs. A Generative AI system might use around 33x more energy than machines running task-specific software.⁵ Data centres, which store and analyse the data needed to power AI models, also create demand for specific resources. Technology hyperscalers such as Microsoft, Amazon and Google have expressed a preference for nuclear energy to power their artificial intelligence (AI) data centers, boosting sentiment for uranium and uranium mining companies.⁶

The transition to lower carbon fuels is also influencing demand and creating long term investment opportunities. Consultancy group McKinsey estimates that low-carbon energy sources will grow from 32% of the global power generation mix today to 65 to 80% by 2050.⁷ Much of the increase will occur due to electrification in the buildings and transport sectors, coupled with decarbonisation of the power sector.

However, fossil fuels will still be needed while the transition takes place. Although demand growth may be falling, if the supply side of the equation is constrained at a faster rate than demand is eroded, then we will still see higher-than-expected long-term prices. Global oil demand over the past four years has proved to be much more resilient than had been expected by market forecasters in 2019.⁸ We have been adding to oil and gas exploration and production holdings, believing they may prosper under the new US administration.⁹

On the BlackRock Energy and Resources Income Trust, we expect the low carbon transition to drive structural demand growth for a range of commodities, creating growth opportunities. Building wind turbines, solar panels and electric vehicles requires commodities such as copper, iron ore, coking coal, steel, silver, aluminium, lithium, zinc, nickel and rare earths. With countries holding ambitious net zero targets for 2050 or 2060, we expect this wave of demand to play out over decades, far longer than a traditional cycle.