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Informist, Monday, Jun. 1, 2026

 

MUMBAI – The conflict in West Asia and the closure of the Strait of Hormuz have altered risk perception in the energy sector and bolstered moves towards greater diversification away from crude oil as a major energy source, according to the International Energy Agency. Visible is a growing interest among fuel-importing countries in domestically available energy sources, including renewables, nuclear power and, in some cases, coal, the intergovernmental organisation said in a report.

 

According to the agency's estimates, global energy investment will reach $3.4 trillion in 2026, a slight increase year-on-year. Of this amount, around $2.2 trillion is expected to go to grids, storage, low-emissions fuels, nuclear power, renewables, efficiency and electrification, while around $1.2 trillion is set to be invested in oil, natural gas and coal.

 

Even amid higher oil prices, oil investment is expected to decline for a third consecutive year in 2026, falling below $500 billion. The underlying causes of the decline, according to the report, are uncertainty over the duration of the price spike, long project lead times, supply chain constraints, and tighter offshore rig markets, which are limiting near-term spending responses outside the West Asian region. However, the report said that natural gas investment is projected to rise to $330 billion, the highest level in a decade, supported by a wave of new LNG export projects globally, particularly in the US and Qatar.

 

While annual investment growth in renewables has moderated following several years of rapid expansion, low-emissions sources still account for more than 70% of total global power generation investment. Nuclear investment is continuing its resurgence, exceeding $80 billion annually, with close to 80 gigawatts of new nuclear capacity under construction across 15 countries, it said.

 

"The far-reaching effects of the conflict in the Middle East are prompting countries and companies to rethink energy investment strategies in response to heightened concerns over energy security and the reliability of trade flows," the IEA's annual World Energy Investment report, released last week, said.

 

"We are in the midst of the largest energy security crisis the world has ever faced – and 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," IEA Executive Director Fatih Birol said. "We are already seeing intensified efforts by both producer and consumer countries to diversify trade routes and energy sources – such as advancing new pipelines and other supply infrastructure, on the one hand, and turning more to domestically available resources, on the other. These range from renewables and nuclear to coal, oil and gas, in some cases, as well as broader measures to strengthen electricity systems, expand electrification and accelerate energy efficiency."

 

Moreover, the war in West Asia is complicating the prospects for financing future energy projects, the report said. It has triggered volatility in financial markets, slowing investment decisions in the short term and pushing up long-term financing costs. This could disproportionately affect capital-intensive energy technologies, particularly in emerging and developing economies where financing costs are already significantly higher than in advanced economies.

 

Electricity-related investment remains the dominant theme in global energy spending trends, the report said. Investment in electricity supply and infrastructure is expected to reach nearly $1.6 trillion in 2026 and rise to $2 trillion when end-use electrification is included. Spending on electricity grids is projected to approach $550 billion, up nearly 20% year-on-year, while battery storage investment is set to exceed $100 billion, it said.

 

"The electricity demands of the rapid expansion of data centres and artificial intelligence are also becoming a major influence on energy investment trends in some markets, particularly in the United States. Orders for new gas-fired power plants reached a 25-year high in 2025, with data centre needs playing a significant role. The strong demand in the United States and the Middle East is limiting the availability of turbines for near-term deployment elsewhere in the world."  End

 

US$1 = INR 94.99

 

Reported by Abhijit Doshi

Edited by Saji George Titus

 

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