West Asia conflict set to reshape global energy investment strategies: IEA

Mumbai: The escalating conflict in West Asia and the resulting disruption of global energy supply chains are prompting countries and corporations to reassess long-term energy investment strategies, according to a new report by the International Energy Agency (IEA).

The Paris-headquartered IEA, in its latest World Energy Investment 2026 report, said growing concerns over energy security and the reliability of global trade routes were accelerating moves towards diversification of energy sources and infrastructure.

The report projects global energy investment to touch $3.4 trillion in 2026, marking a modest increase over the previous year.

Of this, around $2.2 trillion is expected to flow into power grids, storage systems, low-emission fuels, renewables, nuclear energy, electrification and energy-efficiency projects, while approximately $1.2 trillion is projected to go towards oil, natural gas and coal investments.

According to the report, the ongoing energy crisis — triggered largely by the effective closure of the Strait of Hormuz due to regional tensions — is reshaping risk perceptions across global energy markets.

The latest disruption comes barely a few years after the global energy turmoil caused by Russia’s invasion of Ukraine in 2022, reinforcing concerns among major economies about overdependence on vulnerable supply routes.

The report noted that the current supply shock is likely to leave a lasting impact on investment priorities, particularly across Asia and West Asia, where disruptions in shipping flows through the Strait of Hormuz have been felt most acutely.

“We are in the midst of the largest energy security crisis the world has ever faced,” IEA Executive Director Fatih Birol said in a press statement.

“I believe this will reshape investment strategies globally, with parallels to the major changes the energy world witnessed after the oil shocks of the 1970s,” he added.

Birol said both producer and consumer nations were intensifying efforts to diversify trade routes and energy sources by expanding pipeline infrastructure, strengthening electricity systems and increasing reliance on domestically available resources.

These include renewables, nuclear energy and, in some cases, conventional fuels such as coal, oil and gas.

Despite higher crude prices, the report forecasts a decline in global oil investment for the third consecutive year in 2026, with spending expected to fall below $500 billion.

The IEA attributed this to uncertainty over the duration of the price spike, long project lead times, supply-chain constraints and tighter offshore rig markets outside West Asia.

In contrast, natural gas investment is projected to rise to $330 billion — the highest level in a decade — driven by a fresh wave of LNG export projects, particularly in the United States and Qatar.

The report also pointed to growing interest among energy-importing countries in domestically available energy sources.

Investment in renewable power projects is expected to reach around $665 billion in 2026, including nearly $365 billion for solar energy alone.

Although the pace of growth in renewable investments has moderated after years of rapid expansion, low-emission technologies still account for more than 70 per cent of total global power-generation investment.

Nuclear energy investment is also witnessing a revival, crossing $80 billion annually, with nearly 80 gigawatts of new nuclear capacity currently under construction across 15 countries.

Meanwhile, coal investment is expected to rise to $180 billion in 2026 — the highest level since 2012 — with China accounting for nearly 70 per cent of global coal-supply spending.

The report observed that several Asian countries affected by the current crisis may extend the operational life of coal-fired power plants to strengthen short-term energy security.