Ian Cowie: two trusts finding tailwinds amid geopolitical tensions

More than six months after the start of the Iran war, which US President Donald Trump said would last six weeks, burning tankers in the Gulf pushed the price of a barrel of oil to $101 at the time of publication, prompting fears of higher inflation and interest rates this winter. That’s bad for the global economy but surprisingly good for some investment trusts.

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For example, the shipping specialist Tufton Assets Ord (LSE:SHIP) (stock market ticker: SHPP for sterling shares and SHIP for dollar-denominated stock), whose primary attraction for this small shareholder is a dividend yield of 7.2% that has grown by an annual average of 6.3% over the last five years, has seen its share price jump by 20% in the last six months. The explanation is that Iranian attacks on shipping in the Strait of Hormuz and more recent Houthi threats to the Bab al-Mandab Strait have restricted access to the Suez Canal and pushed up freight rates.

Another unexpected beneficiary of the Iran war is the renewable energy sector, because violence in the Gulf demonstrates the danger of relying on Middle Eastern oil and liquefied natural gas (LNG). To be specific, Greencoat UK Wind (LSE:UKW), whose main attraction for this investor was also a high and rising income - it is currently yielding 9.7% after increasing dividends by an annual average of 7.8% per annum - has seen its share price surge 15% higher since January.

Might both trends continue? Annabel Brodie-Smith, a director of the Association of Investment Companies (AIC), pointed out: “When the conflict started at the end of February, several investment sectors took an immediate hit but markets quickly adapted, with some even benefiting from the impact of the war.

“One sector that’s seen a real turnaround is ‘Renewable Energy Infrastructure’, which had a tough time over the past couple of years when interest rates were rising. Shares across the sector have bounced as investors have warmed to renewable energy during a war that has exposed the weaknesses of our oil and gas supply chains. The shipping sector has also profited from the conflict.”

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Similarly, Nicolas Tirogalas, chief executive of Tufton Investment Management, which manages SHPP, said: “The net effect of the conflict is that shipping is now having to go further, taking longer routes to avoid the Strait of Hormuz, and that means more of our fleet is in use more of the time, which adds to demand.

“This is reflected in shipping earnings, such as with SHPP, where the second quarter of 2026 had the highest earnings in the last five years.”

It’s an ill wind that blows no good and, as mentioned above, renewables are also benefiting from the new breeze. Stephen Packwood, co-manager of Greencoat UK Wind, explained: “Investor interest in renewables has picked up since the start of the war given security of supply and cost of energy concerns.

“But what has really made the difference for Greencoat UK Wind is our strong performance in terms of power and net cash generation. This resulted in our dividend being 1.9 times covered in the first six months of 2026 but also provides us with significant further capital to grow the business.”

Can these upward trends be sustained? Tirogalas claimed: “If the Iranian conflict cools or is resolved the situation is unlikely to revert to the status quo before the war.

“History shows that economies faced with such disruption, once they have found new reliable places to source their vital raw materials, don’t tend to go back to the supply chains that failed in the past, even if that means going further afield to source their strategic raw materials.”

Packwood also argues there is further to go. He said: “Investors are increasingly choosing Greencoat UK Wind for our self-sustaining model, driven by reinvesting organic cash flows. Renewables, in particular wind, are well placed to take advantage of the forecast increase in electricity demand over the coming years.”

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Against all that, both these trusts and their sectors still have plenty of room for improvement. Greencoat UK Wind shares continue to be priced 18% below their net asset value (NAV), having delivered modest total returns of 12%, 20% and 82% over the last year, five years and decade. Tufton Assets also trades on a double-digit discount of 11% to its NAV, having delivered total returns of 35% and 59% over the last year and five years; it was launched in December, 2017, so lacks a decade-long history.

Put more positively, both funds demonstrate the value of building a diversified portfolio, where even bad news can have some good results. While investors had better get used to the idea of no longer enjoying the “peace dividend” delivered by the end of the Cold War more than 30 years ago, today’s real wars will create winners as well as losers.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Greencoat UK Wind (UKW) and Tufton Assets (SHPP) as part of a globally diversified portfolio of investment trusts and other shares. You can read more from him at iancowie.co.uk