The disruption of energy supplies caused by the war involving Iran is giving governments in Europe and Asia a stronger economic reason to accelerate renewable energy investment. The immediate concern is not climate policy but energy security: dependence on imported oil and natural gas has exposed major economies to sharp price increases and supply risks when shipping through the Strait of Hormuz is disrupted.

The shift does not mean the conflict has suddenly made renewable energy the dominant answer to every energy problem. Governments are also increasing coal use, seeking additional natural gas supplies and considering new fossil fuel infrastructure to protect electricity supply. The evidence instead points to a more complicated response in which the disruption is strengthening the case for domestic energy sources while short term supply concerns continue to support fossil fuels.

The Strait of Hormuz remains central to this calculation. The waterway has historically carried around one fifth of global oil and liquefied natural gas shipments, making disruption there particularly damaging for countries that depend heavily on Middle Eastern energy imports. Recent assessments have found that the crisis has already pushed up energy prices in Europe and Asia and encouraged governments to reconsider the risks of concentrating energy supply around vulnerable shipping routes.

For governments, the lesson is increasingly straightforward: energy that can be produced domestically is less exposed to international shipping disruptions and sudden movements in global fuel prices.

Energy security is strengthening the case for renewables

The strongest argument for renewable energy in the current environment is its different exposure to international fuel markets. Solar and wind projects require substantial investment to build, but once operating they do not require continuous purchases of imported coal, oil or natural gas. Their operating costs are therefore less directly affected by disruptions in global fuel supply.

That distinction has become more important as European and Asian economies have experienced higher energy prices. The International Energy Agency expects renewable electricity generation to grow by more than 8 percent globally in 2026, allowing renewable generation to overtake coal as the largest source of global electricity generation. It also expects renewables to continue expanding rapidly through the end of the decade.

The Middle East conflict adds another reason for governments to support that investment. A solar plant or wind farm does not eliminate all energy security risks because electricity grids, equipment supply chains and storage systems remain vulnerable to disruption. But renewable generation reduces the amount of fuel that must be imported continuously to keep power stations operating.

That makes the economic value of renewables different during an energy crisis. Their importance is not only about reducing carbon emissions. They can also act as a partial hedge against international fuel price shocks.

This is particularly relevant for countries with limited domestic fossil fuel resources. Economies such as Japan and South Korea rely heavily on imported energy, leaving them vulnerable when oil and gas flows from the Middle East are disrupted. Analysis of the crisis has highlighted how greater domestic renewable capacity can reduce the extent to which higher international fuel prices pass through to domestic energy costs.

Europe has a stronger reason to reduce imported fuel exposure

Europe entered the current crisis with a larger renewable energy base than it had during earlier energy shocks. The European Union generated about half of its electricity from renewable sources in 2024 and 2025, according to European investment data, reducing its dependence on imported fossil fuels.

The current disruption is therefore reinforcing an investment direction that was already underway. The European Union is expected to add more than 400 gigawatts of renewable capacity between 2026 and 2030, with solar accounting for about 70 percent of the additions. Renewable sources are forecast to meet all of the region’s additional electricity demand during that period, displacing fossil fuel generation.

The incentive is particularly strong because European gas markets have been directly affected by the disruption. European liquefied natural gas prices have risen sharply as shipping through the Strait of Hormuz has been restricted, forcing European and Asian buyers to compete for alternative supplies.

That experience reinforces the argument that reducing gas dependence is not simply a climate objective. It can also reduce exposure to sudden changes in international energy markets.

However, Europe’s transition has limits. Solar and wind generation vary according to weather conditions, while electricity demand continues to rise. That means renewable investment must be accompanied by stronger grids, electricity storage and flexible generation. Without those supporting systems, replacing fossil fuel generation quickly can create reliability problems during periods when renewable output is low.

Asia faces a harder energy security choice

The crisis is more complicated for Asia because many economies are more dependent on imported fossil fuels while electricity demand is growing rapidly. Southeast Asia is expected to experience particularly strong growth in energy demand, increasing the need for new generation capacity and stronger electricity networks.

The region is responding with greater investment in renewables, but the transition is uneven. The International Energy Agency expects renewable energy investment in Southeast Asia to reach about $22 billion in 2026, more than 2.5 times investment in fossil fuel based generation. At the same time, coal and natural gas remain important sources of electricity, particularly where governments are concerned about reliability and affordability.

The different responses of Asian economies demonstrate why the energy transition cannot be reduced to a simple shift from fossil fuels to renewables. China has expanded solar generation rapidly, while other countries have increased coal use to compensate for supply disruptions and high gas prices. Vietnam, for example, has considered additional coal generation despite its earlier commitment to avoid new coal plants after 2030.

The underlying reason is straightforward. Governments have to maintain electricity supplies while investing in a cleaner system that may take years to develop. When an energy crisis threatens immediate shortages, coal and gas can appear easier to deploy than a complete renewable system supported by new transmission and storage capacity.

This creates a tension between short term energy security and long term decarbonisation.

Coal is gaining ground even as renewables expand

The increase in renewable investment should therefore not be mistaken for an immediate decline in all fossil fuel use. The current energy shock is producing both trends at once.

Coal generation has increased in some Asian markets because governments need reliable electricity while imported gas has become more expensive or difficult to obtain. The International Energy Agency expects global power sector emissions to rise in 2026 before broadly stabilising, partly because some countries are switching from gas to coal in response to high gas prices.

This is an important limitation of the argument that the Iran war will automatically accelerate the global clean energy transition. A country can increase solar capacity while also burning more coal. It can expand electric vehicle adoption while increasing gas imports. The direction of energy policy depends on price, reliability, infrastructure and access to capital as well as climate objectives.

Higher interest rates can make the transition more difficult because renewable energy projects require large upfront investments. Governments and companies must finance solar farms, wind projects, transmission networks and storage facilities before those assets generate electricity and revenue.

The energy crisis therefore creates a paradox. Higher fossil fuel prices strengthen the economic case for renewables, but higher financing costs can make the renewable investment needed to reduce fossil fuel dependence more expensive.

Electric vehicles are adding another layer to the shift

The effect of the crisis is also extending beyond electricity generation. Higher oil prices are encouraging consumers and businesses to reconsider transport costs, supporting the adoption of electric vehicles in some major markets.

China provides the clearest example. Electric vehicles have continued to gain market share, while the country has also expanded its domestic renewable generation. Recent analysis has linked a significant portion of the decline in Chinese crude oil imports to increased vehicle electrification. Europe has also seen stronger interest in electric vehicles as higher fuel prices increase the cost advantage of alternatives.

Transport electrification matters because oil is still overwhelmingly used outside the electricity sector. Renewable electricity can reduce oil dependence only when vehicles and other energy uses can be shifted onto the electric system.

That means the long term effect of the crisis will depend not only on how many solar panels and wind turbines are installed, but also on how quickly transport, heating and industrial energy use become electrified.

The crisis may change investment priorities, but not in one direction

The war has clearly increased the importance of energy security in investment decisions. The International Energy Agency expects global energy investment to rise to about $3.4 trillion in 2026, with clean energy investment reaching about $2.2 trillion, nearly twice the amount directed toward fossil fuels. It has also identified diversification and domestic energy sources as increasingly important responses to disruptions in global fuel trade.

But the crisis is unlikely to produce a uniform global move away from fossil fuels. Countries with domestic coal and gas resources may use them more heavily, while countries highly dependent on imported energy may place greater emphasis on solar, wind, nuclear power, storage and electricity grids.

The important change is that renewable energy is increasingly being evaluated through two separate lenses. It remains a tool for reducing emissions, but it is also becoming an instrument of national energy security.

That second argument could prove more durable because it does not depend entirely on climate policy. Governments can justify renewable investment as a way to reduce exposure to fuel imports, shipping disruptions and international price shocks.

The current conflict has therefore strengthened the economic case for a more diversified energy system. But whether that produces a sustained acceleration in the transition will depend on investment costs, grid capacity, storage, electricity demand and the future availability and price of alternative fossil fuel supplies.

For Europe and Asia, the central lesson from the Hormuz disruption is not that fossil fuels can immediately be replaced. It is that dependence on a small number of vulnerable energy routes carries an economic cost. Renewable energy offers one way to reduce that exposure, but building enough of it to provide reliable protection requires sustained investment well beyond the duration of the current crisis.

(Adapted from EnergyNow.com)