Dubai: 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, according to a new IEA report.
According to Emirates News Agency, the 2026 edition of the IEA's annual World Energy Investment report highlights that the current energy crisis, stemming from the effective closure of the Strait of Hormuz, is changing risk perceptions and bolstering moves towards greater diversification. Coming just a few years after the energy crisis centred around war in Ukraine in 2022, today's supply shock is expected to leave a lasting imprint on future investment priorities, particularly in Asia and the Middle East, where the impacts of the disruptions to shipping flows through the Strait of Hormuz have been felt most acutely.
IEA Executive Director Fatih Birol noted that the world is amidst a significant energy security crisis, which he believes will reshape investment strategies globally. This shift echoes the major changes in the energy sector following the oil shocks of the 1970s. Both producer and consumer countries are intensifying efforts to diversify trade routes and energy sources, including the advancement of new pipelines, supply infrastructure, and a shift towards domestically available resources such as renewables and nuclear.
The report projects that global energy investment will reach $3.4 trillion in 2026. Of this, approximately $2.2 trillion is expected to be allocated to grids, storage, low-emissions fuels, nuclear, renewables, efficiency, and electrification, while around $1.2 trillion is earmarked for oil, natural gas, and coal.
Despite higher oil prices, oil investment is expected to decline for a third consecutive year in 2026, falling below $500 billion. Factors such as uncertainty over the duration of the price spike, long project lead times, supply chain constraints, and tighter offshore rig markets are limiting near-term spending responses outside the Middle East. Conversely, natural gas investment is projected to rise to $330 billion, driven by new LNG export projects, particularly in the United States and Qatar.
The report highlights a growing interest among fuel-importing countries in domestic energy sources, including renewables, nuclear power, and coal. Investment in renewable power projects is expected to total around $665 billion in 2026, with $365 billion dedicated to solar. While annual investment growth in renewables has moderated, low-emissions sources still account for more than 70% of total power generation investment globally. Nuclear investment is continuing its resurgence, exceeding $80 billion annually, with close to 80 gigawatts of new nuclear capacity under construction across 15 countries.
Coal investment is set to rise to $180 billion in 2026, the highest level since 2012, with China accounting for almost 70% of global coal supply spending. Some Asian countries affected by the current crisis may extend the operation of existing coal-fired power plants to bolster energy security.
Previous energy shocks have led to increased policy attention on demand-side efficiency. Energy efficiency policies have broadened over recent years, with approximately $350 billion invested annually worldwide in efficiency improvements. IEA policy tracking indicates that around 20 countries have announced new efficiency policies due to the crisis, though gaps remain.
The Middle East conflict is complicating prospects for financing future energy projects, triggering volatility within financial markets, slowing investment decisions, and increasing long-term financing costs. This may disproportionately affect capital-intensive energy technologies, particularly in emerging and developing economies where financing costs are higher than in advanced economies.
Electricity-related investment remains the dominant theme in global energy spending trends. Investment in electricity supply and infrastructure is expected to reach nearly $1.6 trillion in 2026, rising to $2 trillion with end-use electrification. Spending on electricity grids is projected to approach $550 billion, while battery storage investment is set to exceed $100 billion.
The rapid expansion of data centres and artificial intelligence is influencing 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. Strong demand in the United States and Middle East is limiting the availability of turbines for near-term deployment elsewhere in the world.