Today’s price movements in the energy sector have been quite remarkable. News that Russian energy giant Gazprom has reduced natural gas flows on its Nord Stream-1 pipeline to 20% capacity following a review of a Siemens engine, which was refurbished in Canada, has sent shockwaves through the industry. However, for investors in uranium plays such as Uranium Energy (NYSEARCA:UEC) and UEC stock, this news is turning out to be bullish today.
The thesis is relatively simple. If European economies want to wean off of Russian oil and gas, renewable sources of energy are needed. Not only that, but these sources of energy ought to be located in Europe.
One of the key issues which is dividing these countries today is the discussion around nuclear energy. Germany has shifted its focus away from nuclear power, shutting down its remaining plants just as the Russian invasion of Ukraine began. Now, the rhetoric appears to be changing, at least for European economic powerhouses.
Let’s dive into why Uranium Energy is seeing such an uptick in interest today.
UEC Stock Soars on Revitalized Nuclear Power Hopes
A key provider of uranium, the key ingredient in nuclear power generation, investors appear to be bullish on Uranium Energy as the tone shifts in Europe and other nations. Besides Europe, Japan also announced plans to restart four more nuclear reactors. Considering many of its reactors were not in operation after the disaster at the country’s Fukushima Daiichi power plant, that says just about everything investors want to hear about how safe next-generation nuclear energy is.
For Europe, energy policy has become the latest divisive force investors are increasingly worried about. European bonds are slumping, with the Euro recently reaching parity with the U.S. dollar. All else equal, it appears the European economy could be due for a bigger recession than that of the U.S.
One of the key factors driving these fears is the potential for energy rationing in Europe. Energy is needed for the production and sale of pretty much everything. Thus, the move would be akin to rationing the size of an economy. Nuclear power, and the uranium behind this movement, could be the answer to Europe’s woes.
While some significant long-term investments will need to be made, it’s clear the market’s forward-looking mechanism is pricing something in today. Accordingly, uranium stocks such as UEC ought to be on investors’ radar right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
