Morgan Stanley's European strategists and sector analysts have set out a list of considerations for sustainability-focused investors assessing exposure amid the Iran conflict. Their review targets the sectors they judge most likely to be affected, and identifies both market and policy channels through which disruption could transmit to sustainable funds.
The bank points to tangible disruption in energy markets tied to the conflict, noting that elevated oil and gas prices have returned energy security to the forefront of policy and investor attention. That shift, Morgan Stanley says, could help accelerate interest in low-carbon options such as renewables and nuclear, but may also increase the prospect of government intervention in power pricing and carbon policy.
Analysts at the firm examined potential impacts across a range of sectors, including Oil & Gas, Utilities, Defence, Metals, Technology and Telcos, while also calling out carbon policy as a vector of risk. They highlight that sustainability funds have already raised their exposure to Aerospace & Defence in 2025, and that this appetite is growing as geopolitical tensions reinforce the investment case for the sector.
At the same time, the report observes that sustainability funds carry substantial allocations to the tech sector. The analysts warn of sector-specific vulnerabilities tied to the conflict, including the potential for chip manufacturing disruption and what they describe as the "sulphur squeeze," which could affect supply chains and production inputs relevant to technology firms.
In response to the shifting risk landscape, Morgan Stanley's European Equity Strategy team has refreshed its sector model - explicitly embedding energy security risks and non-linear AI acceleration into its framework. The bank lists its current overweight positions as Semis, Utilities, Tobacco, Energy, Defence, Banks, Food Retail and Telcos.
The bank's briefing frames a complex set of trade-offs for sustainability investors: while higher energy prices could bolster the case for low-carbon generation, they may also prompt policy actions that complicate returns for both utilities and carbon-intensive sectors. The note underscores the need for investors to assess not only direct commodity impacts, but also second-order policy and supply-chain effects across the sectors the bank identifies.
Contextual note: The analysis is built around the considerations Morgan Stanley's European strategists and sector analysts have identified; it maps potential sectoral effects without assigning probabilities to specific outcomes.