Author: Fiona Craig

TotalEnergies (EU:TTE) has agreed to acquire Shell’s (LSE:SHEL) onshore renewable energy business in Europe while simultaneously selling a 50% interest in a €1.8 billion renewable asset portfolio to KKR, continuing its strategy of recycling capital to fund growth across its Integrated Power business.

The French energy group announced on Monday that the two transactions are designed to strengthen its electricity generation platform while optimising investment across its expanding renewables portfolio.

Shell Deal Adds Renewable Assets Across Key European Markets

Under the agreement, TotalEnergies will purchase Shell’s entire European onshore renewables business.

The acquisition includes around 500 megawatts of solar and wind capacity that is either already operational or currently under construction, with most of the assets located in Italy and the Netherlands.

The transaction also includes a development pipeline of approximately 3.5 gigawatts covering solar, wind and battery storage projects across Italy, the United Kingdom and Spain.

Once regulatory approvals have been obtained and the transaction is completed, which is expected before the end of 2026, TotalEnergies will assume full ownership of the portfolio.

KKR Investment Supports Capital Recycling Strategy

In a separate transaction, TotalEnergies has agreed to sell a 50% stake in a portfolio of onshore solar and wind assets to an insurance account managed by global investment firm KKR.

The portfolio comprises approximately 1.2 gigawatts of renewable generation capacity located in Germany, Spain, France and Poland and carries an enterprise value of €1.8 billion.

Electricity generated by these assets has already been contracted to third parties or will continue to be marketed by TotalEnergies.

Following completion of the transaction, expected during 2026 subject to customary closing conditions, TotalEnergies will retain the remaining 50% ownership interest while continuing to operate the assets.

Strategy Focuses on Long-Term Power Growth

The company said both agreements are consistent with its strategy of developing renewable energy projects before selling minority stakes to recycle capital into new investments.

According to TotalEnergies, acquiring Shell’s renewable assets will reinforce its position in four major deregulated European electricity markets while complementing the flexible gas-fired generation capacity provided through TTEP, its joint venture with EPH.

“In line with our strategy, these two transactions enable us to optimize our capital allocation in renewables while continuing to deploy our Integrated Power strategy,” said Stéphane Michel, President, Gas, Renewables & Power at TotalEnergies.

“The acquisition of Shell’s onshore renewables assets in Europe strengthens our power generation positions in selected key deregulated markets across Europe and supports the implementation of our integrated strategy across the electricity value chain, complementing the flexible generation capacity of the gas-fired power plants of TTEP, our joint venture with EPH, particularly in Italy, the Netherlands and the United Kingdom.”

Michel added that the agreement with KKR highlights the company’s ability to execute its renewable energy model “in order for Integrated Power to reach a ROACE of 12% by 2030.”

Renewable Capacity Continues to Grow

Following the acquisition, TotalEnergies’ European renewables portfolio will comprise close to 10 gigawatts of installed or under-construction capacity, supported by an additional 27 gigawatts of projects currently under development.

Globally, the company had more than 37 gigawatts of gross renewable generation capacity at the end of June 2026 and continues to target net electricity production exceeding 100 terawatt-hours by 2030.

Crude oil prices dropped sharply on Monday, falling more than 6% during Asian trading after U.S. President Donald Trump announced that diplomatic talks with Iran would resume, prompting investors to reduce expectations of an immediate military escalation in the Middle East.

By 02:51 ET (06:51 GMT), October Brent crude futures had fallen 5.7% to $82.94 per barrel, while September West Texas Intermediate (WTI) futures declined 6.5% to $79.16 per barrel.

Despite Monday’s sell-off, both benchmarks still posted gains of more than 20% during July, even after losing more than 5% over the previous week.

Trump Pauses Military Action in Favour of Diplomacy

Late on Saturday, President Trump said he had decided not to proceed with a planned large-scale military strike against Iran after Tehran and several Middle Eastern countries requested additional time to pursue negotiations.

“This (deal) would include the Immediate, Complete, and Total OPENING OF THE HORMUZ STRAIT, and an end to Iran’s nuclear threat,” Trump wrote in a Truth Social post.

While signalling support for diplomacy, Trump also stressed that military action remained an option if negotiations failed to produce an agreement.

The announcement encouraged traders to scale back fears of an immediate disruption to global oil supplies, triggering broad selling across crude markets.

Geopolitical Tensions Had Previously Driven Oil Higher

Oil prices had surged during the previous week after the conflict expanded beyond the Gulf region, raising concerns that critical energy infrastructure and key shipping routes could become increasingly vulnerable.

Iran-backed forces launched drone attacks on Saudi Arabian oil facilities, while strikes targeted natural gas vessels at Egypt’s Damietta port. Shipping lanes through both the Strait of Hormuz and the Red Sea also came under pressure, reinforcing fears that multiple strategic energy corridors could be disrupted.

Those developments briefly pushed Brent crude above $90 per barrel before sentiment reversed following Trump’s latest announcement.

OPEC+ Decision Adds to Downward Pressure

Crude prices also weakened after OPEC+ agreed on Sunday to increase production quotas by approximately 188,000 barrels per day from September.

The decision completes the reversal of one stage of the voluntary production cuts introduced in 2023 as the producer group gradually restores supply.

Earlier quota increases had only a limited effect because production disruptions in Iran, Russia and Kazakhstan offset much of the additional output. However, the latest move suggests OPEC+ believes improving geopolitical conditions now provide greater scope to increase production without destabilising the market.

Gold traded higher on Monday, benefiting from a weaker U.S. dollar after oil prices retreated sharply on renewed hopes of a diplomatic solution in the Middle East. Despite the positive move in precious metals, investors remained cautious ahead of a series of major U.S. economic releases expected to influence expectations for Federal Reserve interest rates.

As of 01:43 ET (05:43 GMT), spot gold (XAU/USD) was up 0.5% at $4,062.41 per ounce, while gold futures gained 0.3% to $4,117.35. Silver (XAG/USD) advanced 0.6% to $57.98 per ounce and platinum (XPT/USD) rose 0.3% to $1,650.18.

Falling Oil Prices Boost Safe-Haven Demand

The precious metal strengthened after U.S. President Donald Trump announced that Iran and several Middle Eastern nations had requested additional time to complete an agreement aimed at reopening the Strait of Hormuz and addressing concerns over Tehran’s nuclear programme.

The announcement reduced fears of an imminent military escalation, triggering a decline of more than $5 per barrel in crude oil prices during Asian trading hours.

Lower oil prices eased immediate concerns about energy-driven inflation, reducing expectations that central banks may need to tighten monetary policy more aggressively.

At the same time, the U.S. Dollar Index slipped further below the 100 level to around 99.7. Because gold is priced in dollars, a weaker U.S. currency makes the metal more affordable for overseas investors, helping to increase demand.

Federal Reserve Policy Remains a Key Market Driver

Although bullion started the week on a positive note, traders continued to assess the outlook for U.S. monetary policy following comments from three Federal Reserve officials who dissented at last week’s policy meeting.

The policymakers argued on Friday that inflation remains above the central bank’s target and that another interest rate increase is needed to maintain the Federal Reserve’s credibility in fighting price pressures.

Higher interest rates generally reduce the attractiveness of gold because the metal does not generate income, making interest-bearing assets relatively more appealing.

Technical Picture Suggests More Confirmation Is Needed

Tony Sycamore, senior market analyst at IG, said he continues to expect higher gold prices over the longer term, although recent trading has not matched those expectations.

“Our bias has been for gold prices to move higher in recent weeks, but the price action has been disappointing to say the least,” Sycamore said.

According to Sycamore, gold must break above resistance between $4,110 and $4,120 before targeting the early July high of $4,202. Such a move would indicate that prices have established a durable base above the late-June low of $3,942 and could signal the beginning of a broader upward trend.

Until that happens, he believes the possibility of another decline toward the $3,942 support level cannot be ruled out.

Economic Calendar Could Shape the Next Move

Investors will now focus on several important U.S. economic reports scheduled for this week, which may provide further guidance on the Federal Reserve’s next policy decision.

Among the key releases are the JOLTS job openings survey, the ADP private employment report, weekly initial jobless claims and Friday’s nonfarm payrolls report, all of which will be closely watched for indications about labour market strength and inflationary pressures.

European equity markets continue to trade near record highs despite recent geopolitical uncertainty linked to tensions involving Iran. In a recent research note, JPMorgan reiterated its positive outlook for the region, arguing that corporate earnings are beginning to recover after several years of relatively muted growth.

The bank’s analysts also said they do not expect inflation expectations to become unanchored, a scenario that could allow the European Central Bank (ECB) to adopt a less aggressive approach to future interest rate increases than financial markets currently anticipate.

Improving Fundamentals Support the Investment Case

JPMorgan believes several factors continue to support European equities. Analysts pointed to strengthening corporate earnings, valuations that remain below those of comparable U.S. companies and generally higher returns to shareholders through dividends and share buybacks.

The bank also highlighted a more supportive regulatory environment, which it believes is encouraging a recovery in mergers and acquisitions (M&A) activity following the slowdown experienced in 2023.

“Eurozone PMIs, credit growth, and earnings revisions are all trending positive, with the CESI hitting a two-year high. After outperforming the US last year, accounting for 7% of total return in local currency terms, eurozone equities are slightly ahead again this year, up 12% versus 9%, respectively,” JPMorgan said.

Rotation Beyond Artificial Intelligence

Although the bank believes the recent market rotation away from high-momentum stocks is becoming more mature, it continues to favour portfolio diversification during the second half of the year.

According to JPMorgan, artificial intelligence is likely to remain an important investment theme, but investors may increasingly find opportunities in other sectors as market leadership broadens.

Shareholder Activism and M&A Activity Could Increase

The investment bank also expects shareholder activism to become more prominent across Europe, arguing that many listed companies continue to trade below their intrinsic value despite generating resilient cash flows.

Analysts believe European companies often possess identifiable opportunities to improve governance, capital allocation or operational performance without facing significant financial distress.

Industrial companies, consumer discretionary businesses and technology firms remain the sectors most frequently targeted by activist investors, while campaign activity is particularly strong in the UK, Germany and France.

JPMorgan also noted that proposed revisions to the Shareholder Rights Directive III (SRD III) could help accelerate shareholder activism by creating a more supportive regulatory framework.

Undervalued Companies Continue to Attract Buyers

The bank observed that activist investors are increasingly focused on capital allocation rather than corporate strategy, encouraging companies to increase shareholder returns through share buybacks and dividend distributions.

JPMorgan also pointed out that a relatively high proportion of listed companies in the UK, France and Germany continue to trade below book value compared with U.S. peers. Combined with the ongoing recovery in global M&A activity, this creates an attractive environment for corporate acquisitions as businesses seek greater scale and international competitiveness.

Eurozone government bond yields were broadly unchanged on Monday, while shorter-dated yields edged lower after a sharp decline in crude oil prices reduced near-term inflation concerns. The move followed news of renewed diplomatic efforts between the United States and Iran, which improved market sentiment and supported fixed-income assets.

Germany’s two-year government bond yield, which is particularly sensitive to monetary policy expectations, fell to 2.766%. Meanwhile, the benchmark 10-year Bund yield remained largely stable at 3.155%.

Diplomatic Progress Supports Bond Markets

Investor confidence improved after U.S. President Donald Trump announced that direct discussions with Iranian officials were scheduled to begin on Monday. He also revealed that a planned military strike had been cancelled in an effort to reach an agreement that would reopen the Strait of Hormuz.

The president said the United States was engaging with Iran “in the form of negotiations… it starts tomorrow afternoon and we’ll see if it’s true.”

The prospect of diplomatic progress contributed to a decline of more than 4% in global crude oil prices, reducing immediate concerns that higher energy costs would fuel inflation across Europe.

July Was a Difficult Month for European Debt Markets

Monday’s calmer trading followed a challenging July for eurozone government bonds. During the month, Germany’s benchmark 10-year yield climbed by around 30 basis points to its highest level in roughly 15 years, approaching 3.21%.

Bond markets faced sustained pressure from the prolonged conflict between the United States and Iran, volatile energy prices and continued uncertainty surrounding U.S. Federal Reserve policy, all of which reinforced expectations that interest rates could remain elevated for longer.

Inflation and Growth Continue to Shape ECB Expectations

Economic data released toward the end of July also influenced investor sentiment. Preliminary figures showed that eurozone gross domestic product expanded by 0.4% in the second quarter, exceeding market expectations.

At the same time, July’s flash inflation data indicated that headline consumer price inflation rose to 2.9% from 2.8% in June, while core inflation accelerated to 2.5%, supported by higher services costs and the impact of energy prices.

The combination of resilient economic growth and persistent underlying inflation strengthened expectations that the European Central Bank could continue tightening monetary policy.

Markets Await Further ECB Signals

After raising interest rates by 25 basis points to 2.25% in June, the ECB has indicated that another increase remains a possibility at its policy meeting on 10 September.

Financial markets are currently pricing in at least one additional quarter-point rate rise before the end of the year, with some investors expecting two further increases if inflation remains stubbornly high.

With oil prices retreating, attention is now turning to August economic data to assess whether eurozone bond yields have temporarily stabilised or whether persistent inflationary pressures could drive borrowing costs higher in the coming months.

TotalEnergies (EU:TTE) shares declined 1.1% on Monday after crude oil prices fell sharply following comments from U.S. President Donald Trump suggesting diplomatic talks with Iran were set to begin.

Speaking to reporters aboard Air Force One, Trump said the United States was engaging with Iran “in the form of negotiations… it starts tomorrow afternoon and we’ll see if it’s true.” He also stated that an agreement concerning the Strait of Hormuz was “imminent.”

Energy Sector Weakens Alongside Crude Prices

The decline in oil prices weighed on energy stocks across Europe, with peers including BP (LSE:BP.) and Shell (LSE:SHEL) also trading lower during the session.

Although U.S. equity markets remained in positive territory, with the S&P 500 gaining 0.4%, the Dow Jones rising 0.6% and the Nasdaq advancing 0.5%, the stronger sentiment in broader markets failed to offset selling pressure across the European energy sector.

Commodity Exposure Keeps Pressure on TotalEnergies

As one of the largest constituents of both the CAC 40 and the Euro Stoxx 50, TotalEnergies remains highly sensitive to movements in global crude oil prices. The fall in energy markets overshadowed any optimism surrounding the prospect of renewed diplomatic engagement between Washington and Tehran.

The weaker commodity backdrop reinforced investor caution towards integrated oil producers despite the broader improvement in market sentiment.

Analysts Remain Cautious

Monday’s decline also reflected several company-specific considerations. Investors continue to assess TotalEnergies’ capital allocation strategy following Shell’s acquisition of renewable energy assets, while recent downward revisions to earnings forecasts have contributed to a more cautious market outlook.

As a result, the shares traded within a daily range of €74.34 to €75.60, remaining well below their 52-week high of €81.34.