Oil Investments to Drop for Third Year on War Shock, IEA Says

Global oil investment is set to decline for a third consecutive year in 2026, according to the International Energy Agency’s (IEA) annual World Energy Investment report published Thursday. The drop—to below $500 billion despite rising crude prices—is driven by the closure of the Strait of Hormuz amid the Middle East conflict, which the IEA described as the most severe energy security crisis in history. The disruption, which halted a fifth of global seaborne crude shipments, has triggered price spikes, supply shortages, and a profound rethinking of energy investment strategies, with parallels to the oil shocks of the 1970s.

Overall global energy investment is expected to reach $3.4 trillion in 2026, a 5% rise from 2025. Around $2.2 trillion of that will go to power grids, storage, low-emission fuels, nuclear, renewables, energy efficiency, and electrification. Solar investment alone is projected at $365 billion, and renewable power investment at roughly $665 billion. In contrast, spending on oil, natural gas, and coal combined will total around $1.2 trillion. Natural gas investment is rising to $330 billion, the highest in a decade, supported by new LNG projects in the United States and Qatar. Coal investment is set to reach $180 billion, its highest since 2012, with China accounting for nearly 70% of global coal supply spending. Spending on electricity grids will approach $550 billion, up nearly 20% year-on-year, and battery storage investment will exceed $100 billion.

IEA Executive Director Fatih Birol said the crisis “will reshape investment strategies globally,” with countries intensifying efforts to diversify supply routes and turn to domestic resources—including renewables, nuclear, coal, oil, and gas. Fuel-importing nations are showing growing interest in homegrown energy, while some Asian countries may extend operation of existing coal-fired plants to bolster security. In India, energy investment is set to reach $170 billion in 2026, with solar photovoltaic and oil refining accounting for a quarter of the increase. India now invests three dollars in renewables and nuclear for every dollar spent on fossil fuel generation, and its power sector accounts for roughly half of total energy spending. In Africa, clean energy spending is expected to reach nearly $50 billion, and record solar panel imports—up 120% year-on-year from China in early 2026—reflect a push for energy security. However, higher borrowing costs triggered by the conflict could disproportionately affect capital-intensive clean energy projects in emerging and developing economies, where financing costs are already double those in advanced economies.