Hi {{first_name}},

Oil futures recently closed above $100 barrel for the first time since 2022. 

As of today, the Strait of Hormuz has been closed for about 15 days causing a 90% drop in significant traffic. The International Energy Agency has called this “the largest supply disruption in history.” The conflict has set the markets into a bit of a tailspin. Equities are taking a hit, gas and transportation costs are rising, and downstream effects are just beginning to take hold. 

Everyone is watching the Futures, but I’m thinking about the past.

Because just 3 months ago, brent crude had dropped to $56/barrel, a 5 year low. 

By the time oil had reached its bottom, we had raised over $11 million dollars across two energy funds. My team pitched energy as prices hovered in the low $60s range for most of the year and analysts predicted 2026 would continue the supply glut. 

Then this happened:

Truthfully, I had no idea the Iran conflict would erupt. I didn’t need to.

Even with oil clearing $100, nothing has changed.

Yes, the cash flow on our producing wells is running ahead of projections. But the thesis that brought us into this space did not require oil to hit $100, and the thesis has not changed because of it. We underwrote our energy funds at $71 and $72 so that the investments work in a world where oil stays low. Because we understood what many investors learn the hard way.

The system has always been this fragile.

— Walker Deibel
WSJ & USA Today Bestselling Author of Buy Then Build
Founder, Build Wealth

Through a series of chess moves between the U.S., Israel and Iran, the world’s attention now falls on the Strait of Hormuz, a chokepoint bordering Iran, Oman and the UAE that narrows to just 21 miles at its tightest. Whether you call this a “conflict” or a “war”, the shipping disruptions, and delicate and dangerous geopolitics will grow more complicated in the weeks ahead.  Energy markets felt the squeeze almost immediately and some investors were surprised. Unprepared for how fast prices rose. But the fact is this was set in motion over the past several years.

Energy moves in capital cycles. 

The flow of supply and demand repeats over and over. 

When prices fall, investment disappears. When investment disappears, supply tightens. When supply tightens and demand holds, prices rise. 

When those prices rise, the capital floods back in and the money has been made. And therefore prices fluctuate again. 

This has been the story over the last decade. In the early 2010’s global demand for oil was strengthening as the U.S. and Chinese economies expanded and lower interest rates in parts of Europe drove growth. At the same time, supply pressures were building all over. Conflict-related disruptions in the Middle East and Africa, along with sanctions on Iran, kept about a million barrels of oil per day off the global market. Then the oil price collapsed in 2014, after which capital fled the asset class. Budgets for exploration were cut deeply. Of course, drilling slowed dramatically. The companies that continued to thrive did so by running lean and waiting for the cycle to turn.

Demand, however, never went away. Global consumption continued to grow while investment in new supply stalled.

And now several years later, oil is hovering at $100 again.

Most investors look at that sequence and see a familiar market cycle. They see boom and bust, rise and fall, fear and greed.

But that reading costs people money every time it repeats.

Energy cycles are rarely caused by geology or world events. They are caused by capital.

Global energy capex peaked in 2014 and never recovered. The gap between what the world needed and what the industry was willing to build widened.

The investor who ignored energy at $65 and is scrambling at $100 was always watching the wrong thing. Price is a lagging signal. Capital flows are a leading one. The opportunity was the underinvestment, not the price. And for many investors, the real opportunity in energy isn't just price exposure, but the tax advantages embedded in domestic oil and gas investing. 

Investors who focus only on price are reacting to what has already happened, while those who watch capital flows are paying attention to the forces that tend to shape what happens next. Investors make the same mistake in other sectors. They chase the story everyone is talking about, while capital moves somewhere else.

One of our operating partners has been acquiring cash flowing oil wells for four decades. Across six funds, he's maintained a 50% average IRR — net returns he's reported across multiple full price cycles. When asked how, he offers an answer that sounds like investing 101:  Buy when nobody wants it, sell when everyone does. 

He watches the private equity sell cycle and positions himself on the opposite side of it. When PE firms need liquidity and are offloading energy assets at distressed prices, he's ready to buy them. When capital floods back in and prices recover, he's again there to sell. He reads capital behavior and lets the cycle do the work.

The Physical Nature of Oil is the Key

Capital cycles create supply shortages and the system is so fragile it turns those shortages into violent price moves.

Think about the physicality of oil itself. 

It’s a physical commodity that requires enormous coordination and moves across a global infrastructure before it even becomes the product we rely on. It must be extracted, transported, and refined across the slimmest of waterways, through continents, and working with multiple governments. 

If 20% of the world's oil supply moves through the Strait of Hormuz and that waterway is closed,  then a fifth of the global supply is effectively offline before markets open the next morning.

The full journey is even more complicated. The Strait of Malacca connects the Indian Ocean to the Pacific and carries the energy lifeline for China, Japan, and South Korea. The Bab-el Mandeb sits at the southern tip of the Red Sea, in the middle of one of the world's most active conflict zones. The Suez Canal moves oil from the Middle East to Europe through a narrow channel of water cut across the Egyptian desert.

What’s happening today is not a market cycle. Instead it’s a geopolitical moment within a fragile system.

The headlines right now are specific to this conflict and the sanctions.  But as this conflict escalates or deescalates, the underlying fragility of the physical infrastructure will prove to not be a temporary problem. It has been there for a while and it will be there in 2030. Our global energy system was designed for a world that needed to move oil as efficiently as possible, not one that needed to move it resiliently.

Efficiency and resilience are opposites. Global energy infrastructure optimized hard for efficiency, and that optimization is precisely what created the fragility.

The Gap is Where the Opportunity Lives

Short-term oil prices move with headlines, geopolitical events, and investor positioning. But the supply of oil moves much more slowly, shaped by geology, capital investment, and infrastructure decisions that take years to play out. When capital leaves the sector, supply tightens over time even if prices fall in the short run. When capital floods back in, the cycle begins again.

If your energy investment requires $100 oil to work, it isn't an investment. It's a bet.

Commodity investors often make the mistake of underwriting deals to the price they currently see.  Instead, they should do the opposite: underwrite to the price the fund can survive.

In December 2025, we closed two energy funds within weeks of each other. Different strategies, different structures, different investor profiles. Same underlying asset class and the same foundational discipline running through both.

Neither one assumes $100 oil.

BuildEnergy I is a decade-long rollup targeting a 35% IRR. The approach is simple in concept but demanding in practice. The fund acquires existing cash-flowing wells across the continental United States, assembles a portfolio of non-operating interests, and increases production through infill drilling where the geology supports it.

It’s the Buy Then Build model applied to the oil and gas industry. We look for patient capital that will compound over time, until exit.

The operating partner is Jeff Mohajir. He has spent four decades acquiring producing wells through multiple private market cycles. His edge is recognizing that private equity sell cycles regularly create acquisition windows that have little to do with the quality of the underlying assets. When capital exits the sector, good wells become available.

He has spent four decades positioning himself to buy through those windows while everyone else is heading for the exit.

BuildEnergy I was underwritten at $71 oil.

The second fund, BuildEnergy II was built around a different investor need. For accredited investors with significant active income, the fund allows for an immediate tax deduction on roughly 90% of invested capital in the first year. The precise deduction depends on your tax situation (talk to your advisor) but this is a structural feature of domestic oil and gas that public markets simply don't offer. 

The fund is now fully deployed. It holds non-operating interests in cash flowing wells across the continental US, generating income from production that was already underway before the subscription agreements were signed.

BuildEnergy II was underwritten at $72 oil.

Two Investor Objectives Using the Same Underwriting Philosophy

At $71 and $72 underwriting, both funds were designed to work in a world where oil stayed roughly where it spent most of 2023 and 2024. 

Though we had a geopolitical shock to the system, the investment only required existing production, conservative decline assumptions, proven geology, and an operator with the track record to execute.

With oil approaching the $100 mark the cash flow on owned wells is running ahead of projections. That’s a welcome development, but it does not change how we approach either fund. The surge is a result of the fragility described earlier. 

The fragility ensures the cycle always turns. 

For informational purposes only. This is not an offer or recommendation to sell securities. Past performance is not indicative of future results. Projected returns and tax treatment are estimates only; consult your advisor. Intended for accredited investors.

When evaluating energy funds, it’s natural to begin with projected returns, scan the C-suite bios, and check the fund size. But the fragility of the energy system means price can move violently in either direction at any time. Which means, your greatest protection against that volatility is the quality of the underwriting. To pressure test the investment, you should run it through these five questions. 

1. What is the underwriting oil price?

This is the first question and the most important one. Every oil and gas fund projects returns. The question is what price assumption those returns are built on.

If the answer is north of $80, keep asking. If the answer is north of $90, be skeptical. A fund underwritten at current or near-current prices is optimism dressed up as analysis. The fund should work priced at $60 or $70. Anything above that is upside, not thesis.

Both BuildEnergy funds were underwritten at $71 and $72 base case, respectively. Not because we expected oil to stay there, but because we designed investments that didn't need it to go anywhere else. Operators who have been through multiple cycles underwrite that way by instinct. They have watched $100 oil become $55 oil inside of eighteen months.

2. Are these already producing wells?

There is a significant difference between acquiring existing, cash flowing production and funding exploration or development of unproven reserves.

Existing production means the oil is already coming out of the ground. The geological risk has been resolved. The infrastructure is in place. The cash flow starts immediately. Decline rates are known and modeled. Many disciplined energy investors focus specifically on non-operating interests in producing wells. This allows investors to participate in existing production while experienced operators manage day-to-day field operations.

Exploration and early development carry geological risk, permitting risk, infrastructure risk, and timeline risk on top of price risk. That is a fundamentally different investment with a fundamentally different risk profile. Know which one you are buying before you write the check.

3. What does the operator's track record look like across favorable AND unfavorable conditions?

Any operator can look good when oil spikes to $95. The question is what happened to their investors when oil was at $55.

Ask for performance data across multiple funds and multiple price environments. Ask specifically what happened during the 2015 to 2016 downturn and during the 2020 collapse. Did investors lose capital? Were distributions suspended? Did the operator make opportunistic acquisitions during the downturn or did they go quiet?

Operators who have navigated full cycles develop instincts that cannot be taught. That track record is not a marketing detail. It is the core of the investment case. 

4. How does the fund source its deals?  

You need to know the source and who is on the other side of the trade. Every acquisition has a seller. So, why is that seller exiting? It’s just as important as understanding what you are buying.

The most attractive energy acquisitions happen when motivated sellers create pricing dislocations that have nothing to do with asset quality. The most common motivated seller in oil and gas is a private equity fund running out of time.

PE energy funds typically operate on three to five year timelines promised to their own LPs. When those funds reach the end of their hold period, they need to sell producing assets whether the energy cycle is favorable or not. The wells did not suddenly become worse assets. The seller simply ran out of time. For disciplined buyers with patient capital, those moments are acquisition windows that repeat reliably across every cycle.

A fund should articulate this sourcing edge.  Why does it see deals others don't, why do sellers come to them, and how do they buy at the prices they do? A fund that simply says it targets attractive assets in proven basins is describing textbook Oil, not an edge.

5. Does the exit depend on price appreciation?

Some energy funds are built to generate income through production. Some are built to create value through acquisition and eventual sale. Both are legitimate strategies. The question is whether the exit requires a higher oil price than the entry.

If the answer is yes, the fund is structurally long oil. That is a risk that may not be clearly communicated in the fund documents. A fund built on producing wells that generate cash flow regardless of the headline price treats the cycle as upside. A fund that needs prices to rise to manufacture a return is making a bet.

These five questions will not give you the full story of the fund but they will show you who’s running it and what system they are operating in — and whether they have structured the investment to survive it.

“A system that is optimized for efficiency is fragile.”

-Nassim Nicholas Taleb

Image Source: Shipmap.org

The fragility is the design.

A system built for maximum efficiency leaves no room for redundancy. When one corridor closes, there is no Plan B. That's a structural problem. 

This map was made in 2012. The chokepoints are identical.

Watch the global tanker map at Shipmap.org

Know someone watching energy markets right now? Forward this. It's the framework they won't get from CNBC. And if you have a question about how these funds were structured, just hit reply. We read every one.