The ongoing conflict in West Asia and disruptions around the Strait of Hormuz are triggering the biggest global rethink on energy security and investment strategy since the oil shocks of the 1970s, according to the International Energy Agency (IEA).

In its latest World Energy Investment 2026 report, the IEA said governments and companies across the world are rapidly reassessing supply chains, trade routes, and energy dependencies as fears over energy security intensify.

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

Birol compared the current situation to the structural changes triggered by the oil crises of the 1970s, saying the latest disruptions are likely to reshape global investment priorities for years to come.

Strait of Hormuz disruption

The report highlighted that the effective closure and disruption risks around the Strait of Hormuz — a route through which nearly one-fifth of global oil trade passes — have significantly changed global risk perceptions.

Countries heavily dependent on imported energy, particularly in Asia, are now accelerating efforts to diversify energy sources and reduce vulnerability to geopolitical disruptions.

According to the IEA, nations are increasingly investing in domestic energy sources including renewables, nuclear power, electricity infrastructure, and, in some cases, coal to strengthen energy resilience.

Global energy investment

Despite market uncertainty, total global energy investment is projected to rise to $3.4 trillion in 2026. Around $2.2 trillion of that amount is expected to flow into electricity grids, battery storage, low-emission fuels, renewables, nuclear energy, electrification, and energy efficiency.

Investment in electricity infrastructure is emerging as the dominant theme in global energy markets. Spending on electricity supply and infrastructure alone is expected to approach $1.6 trillion this year and nearly $2 trillion when electrification-related investments are included.

Grid investment is projected to rise nearly 20% year-on-year to around $550 billion, while battery storage investment is expected to cross $100 billion.

Oil investment

Interestingly, the IEA expects oil investment to decline for a third consecutive year in 2026, dropping below $500 billion even as crude prices remain elevated due to geopolitical tensions.

The agency said uncertainty over how long the price spike may last, combined with supply chain constraints and tighter offshore rig availability, is limiting fresh oil spending outside the Middle East.

At the same time, natural gas investment is forecast to rise to $330 billion — the highest level in a decade — driven largely by LNG export projects in the United States and Qatar.

Renewables, nuclear and coal

The report said renewable power investment is expected to reach around $665 billion in 2026, including $365 billion in solar projects alone. Nuclear investment has also crossed $80 billion annually, with nearly 80 gigawatts of new nuclear capacity currently under construction globally.

At the same time, coal investment is rising again, reaching its highest level since 2012, largely driven by China and Asian countries seeking energy security amid geopolitical uncertainty.

The IEA also noted that the rapid expansion of AI and data centres is emerging as a major driver of global electricity demand, particularly in the United States, adding a new dimension to global energy investment trends.

Published on: May 29, 2026 8:05 AM IST