This Nuclear Energy Stock Is Rising as Oil Tops $119 Per Barrel

Recent geopolitical events have sent shock waves through energy markets. Investors have watched the price of oil rise as high as $119 per barrel in some markets, while energy infrastructure assets in the Middle East have been targeted in attacks. The Strait of Hormuz, through which 20% of the world's liquefied natural gas (LNG) and oil flows, is effectively closed as I write this.

All of this uncertainty could fundamentally change how decision-makers think about meeting energy needs, and that could be great news for the nuclear industry and the leading pure-play nuclear energy stock, Cameco (NYSE: CCJ).

Cameco's long-term growth prospects

The company recently signed a long-term agreement to supply the government of India's Department of Atomic Energy with uranium ore concentrate in a contract worth $2.6 billion.

Image source: Getty Images.

It's the sort of deal that highlights Cameco's multifaceted role in supporting the nuclear industry. Its uranium mines in Canada and Kazakhstan provide uranium to nuclear utilities worldwide. Its fuel services segment processes uranium for use in nuclear reactors, with its Blind River refinery in Ontario, Canada, being the world's largest commercial uranium refinery. Finally, it owns a 49% stake in Westinghouse Electric Company, a leading manufacturer of nuclear technology and a provider of aftermarket products and services to nuclear power utilities.

If recent events prompt faster policy shifts toward nuclear energy, Cameco stands to benefit.

A more positive trading environment

Given that many Asian countries heavily rely on LNG and oil coming through the Strait of Hormuz and emanating from the countries under attack by Iran (attacks that could lead to lasting infrastructural damage and make them unwilling to buy energy from the region), this could encourage more investment by them in nuclear energy.

It's an argument that gains weight because Cameco is already doing business with many leading countries in the region, and they are already moving ahead with nuclear investment. For example, Cameco has a long-term uranium supply agreement with the China National Nuclear Corp. I've noted the recent deal with India above. Moreover, Westinghouse is a leading nuclear technology provider for nuclear reactors in Japan, South Korea, and China.

A stock to buy

Unlike some more obvious stocks to buy, like U.S.-focused oil and gas producers, Cameco isn't likely to see an immediate lift, but if the conflict continues, energy policy will be reconsidered, and given the current positive trend toward nuclear energy already in place, that could lead to a rerating for Cameco stock.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cameco. The Motley Fool has a disclosure policy.