The shipping crisis in the Strait of Hormuz triggered by the Middle East conflict is forcing governments and energy companies to overhaul investment strategies to address energy security and global trade route reliability, warned International Energy Agency (IEA) in its World Energy Investment 2026 report published on May 28.

This marks the second major energy shock in five years after the Russia-Ukraine conflict in 2022, with profound implications for future investment priorities, particularly in Asia and the Middle East most affected by the blockade.

IEA Executive Director Fatih Birol said global energy producers and consumers are accelerating diversification of trade routes and energy sources, building new pipelines and supply infrastructure while boosting development of domestically available resources.

These measures span the entire energy spectrum, including low-carbon sources such as renewables and nuclear, traditional fuels like coal, oil and gas, as well as power system upgrades, electrification and energy efficiency improvements.

"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," Birol said in the report.

Global energy investment is forecast to reach $3.4 trillion in 2026, up slightly year on year. Low-carbon and power-related investment accounts for about $2.2 trillion, or 64.7% of the total, while traditional fossil fuel investment stands at $1.2 trillion, or 35.3%, with oil declining but gas and coal bucking the trend.

Despite a sharp rise in international oil prices, global oil investment is expected to fall for a third consecutive year in 2026, dropping below $500 billion. Uncertainty over the duration of the price surge, long project lead times, supply chain bottlenecks and tight offshore rig markets are limiting short-term investment expansion outside the Middle East, the report said.

In contrast, gas investment is set to hit $330 billion, a near-decade high, driven by a new wave of LNG export projects in the United States, Qatar and other countries.

Coal investment is also rebounding sharply, forecast to reach $180 billion in 2026, the highest since 2012, with China accounting for nearly 70% of global coal supply investment. The report noted that some Asian countries may consider extending the operating life of existing coal-fired power plants to prioritise energy supply security amid the crisis.

Global renewable energy project investment is expected to total around $665 billion in 2026, with solar photovoltaic investment at $365 billion. Although annual growth in renewable investment has slowed after years of rapid expansion, low-carbon energy still accounts for over 70% of global power generation investment, continuing to dominate the sector's transition.

Nuclear investment is also steadily recovering, exceeding $80 billion in 2026. Fifteen countries are currently building new nuclear units, with total installed capacity approaching 80 GW.

The explosive growth of data centers and artificial intelligence is reshaping energy investment patterns in some markets, with power-related investment becoming the dominant force in global energy spending. Investment in power supply and grid infrastructure alone will approach $1.6 trillion in 2026, and will exceed $2 trillion when including end-use electrification investment, the report said.

The report also warned that the Middle East conflict is complicating financing prospects for future energy projects, triggering financial market volatility, slowing short-term investment decisions and raising long-term financing costs. This will disproportionately affect capital-intensive energy technologies, further exacerbating global energy transition imbalances, especially in emerging markets and developing countries where financing costs are already much higher than in developed economies.