The far-reaching impacts of the ongoing conflict in the Middle East are prompting governments and companies worldwide to reassess energy investment strategies amid rising concerns over energy security and the reliability of global trade flows, according to the International Energy Agency’s (IEA) World Energy Investment 2026 report.
The report noted that the effective closure of the Strait of Hormuz has triggered a new global energy crisis, marking the second major energy supply shock within five years following the Russia-Ukraine conflict in 2022. The disruption has intensified concerns over supply chain vulnerabilities, particularly across Asia and the Middle East, where economies remain highly dependent on energy imports transported through the strategic waterway.
According to the IEA, the latest crisis is accelerating efforts by both energy-producing and energy-consuming nations to diversify trade routes, strengthen domestic energy resources, and enhance electricity infrastructure. Countries are increasingly investing in renewable energy, nuclear power, natural gas infrastructure, electricity grids, storage systems, and energy efficiency measures to reduce exposure to geopolitical risks.
IEA Executive Director Fatih Birol stated that the world is currently facing the largest energy security crisis in history, with implications comparable to the oil shocks of the 1970s. He highlighted that governments are rapidly advancing new pipelines, alternative supply infrastructure, electrification initiatives, and domestic energy development to strengthen long-term energy resilience.
The report projects global energy investment to reach approximately $3.4 trillion in 2026, reflecting a modest year-on-year increase. Of the total, around $2.2 trillion is expected to be allocated toward low-emission energy technologies and electricity infrastructure, including renewables, grids, storage, nuclear energy, electrification, and energy efficiency. Investments in fossil fuels such as oil, natural gas, and coal are projected to account for approximately $1.2 trillion.
Despite elevated crude oil prices, global upstream oil investment is forecast to decline for the third consecutive year, falling below $500 billion in 2026. The IEA attributed this decline to uncertainty surrounding the duration of current price spikes, long project development timelines, offshore supply chain constraints, and tighter rig availability outside the Middle East.
In contrast, natural gas investment is expected to increase significantly, reaching nearly $330 billion, the highest level recorded in a decade. The growth is being driven by a strong pipeline of liquefied natural gas (LNG) export projects, particularly in the United States and Qatar.
Renewable energy continues to dominate global power sector investment trends. The report estimates that investment in renewable power projects will total approximately $665 billion in 2026, including around $365 billion dedicated to solar energy alone. Low-emission technologies are expected to account for more than 70% of total global power generation investment.
Nuclear energy investment is also witnessing renewed momentum, surpassing $80 billion annually. Nearly 80 GW of new nuclear capacity is currently under construction across 15 countries, reflecting increasing interest in stable, domestically available energy sources.
At the same time, coal investment is projected to rise to approximately $180 billion in 2026, marking the highest level since 2012. China is expected to account for nearly 70% of global coal supply spending. The report noted that several Asian countries impacted by the current energy crisis may extend the operational life of existing coal-fired power plants to strengthen energy security.
Energy efficiency remains another major focus area. Global investment in efficiency improvements currently stands at around $350 billion annually, while more than 20 countries have already announced new efficiency policies in response to the ongoing crisis.
The IEA also warned that the Middle East conflict is creating additional challenges for financing future energy projects. Increased market volatility is slowing investment decisions and driving up long-term financing costs, particularly for capital-intensive clean energy technologies in emerging and developing economies.
Electricity-related investment continues to emerge as the dominant driver of global energy spending. Investment in electricity supply and infrastructure is projected to reach nearly $1.6 trillion in 2026 and rise to almost $2 trillion when end-use electrification is included. Spending on electricity grids alone is expected to approach $550 billion, while battery storage investment is forecast to exceed $100 billion.
The report further highlighted the growing influence of artificial intelligence and data centre expansion on global electricity demand. In the United States, orders for new gas-fired power plants reached a 25-year high in 2025, with rising data centre electricity requirements playing a major role. Strong demand for power generation equipment in the United States and Middle East is also tightening turbine availability for other global markets.
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