Geopolitical shocks have reframed the energy transition as a question of security as well as climate. As governments seek more resilient, affordable energy systems, long-term investors can find opportunities in the infrastructure powering the shift.
For much of the past decade, the energy transition has been framed primarily as a climate story. That no longer captures the reality. Russia’s invasion of Ukraine and the recent conflict in the Middle East have been a stark demonstration to governments and investors that energy systems are also sources of macroeconomic risk, geopolitical vulnerability and industrial advantage. The transition is now being shaped by all these forces at once, and long-term capital needs to understand how they interact.
A more security-conscious world
The Iran conflict produced the largest supply disruption in the history of the global oil market as flows through the Strait of Hormuz fell from 20 million barrels per day to an average of 2.7 million in March, April and May. Oil prices doubled, but record inventory drawdowns, a surge in US exports and remarkable agility from Gulf producers in rerouting supply helped absorb the disruption.1 Nevertheless these are short-term buffers and uncertainty remains as to whether a lasting US-Iran agreement can be reached.
The political response will prove more enduring than any single ceasefire. Both the Ukraine and Middle East conflicts have shaken confidence in imported fossil fuels, prompting policymakers to reassess their exposure to distant geopolitical shocks. Energy security has moved back to the top of the agenda, alongside affordability, and is unlikely to slip simply if oil and gas prices stabilise.
Fossil fuel importers, including much of Europe and large parts of Asia, have the strongest incentive to reduce exposure, while producers such as the US are cushioned by domestic resources.
The economics have shifted
A crucial part of this story is the improved economics of mature clean energy technologies. Solar, onshore wind, batteries and grids are now among the cheapest sources of new electricity across large parts of the world2. For many governments, particularly net importers, clean energy is no longer solely a climate choice; it is increasingly the most cost-effective route to stable domestic energy prices and greater energy security.
Europe’s AccelerateEU programme reflects this alignment. It is framed around energy security and homegrown clean energy, with electrification, grids and renewables at its core. Yet there is pragmatism about what „homegrown“ can realistically mean. Policymakers recognise it is not feasible to compete directly with China’s scale and cost position. The more realistic path is to focus on joint ventures, domestic content requirements and local assembly, supporting jobs, technical capability and supply chain resilience while accepting that much of the intellectual property will come from China.
The crisis has also had a divergent impact across the EU, depending on the existing penetration levels of non-fossil fuel energy. Gas price spikes during the Ukraine and the Middle East conflicts had an outsized impact on how much European electricity costs due to the way electricity is priced on the marginal (or last) unit of electricity bought – which typically tends to be gas. But through growing its renewable energy, Spain has largely decoupled electricity prices from the price of gas (Figure 1) – demonstrating a durable route to stable, affordable energy prices. Nonetheless delivery depends on planning reform, grid connections and policy stability.
Figure 1: European divergence
Countries with more non-fossil fuels have been less affected by the Middle East crisis
Source: EMBER, Decoupled: how Spain cut the link between gas and power prices using renewables”, 2025. Charts show top five countries in EU plus UK by installed gas generation capacity. Fossil influence on electricity prices measured by % hours when electricity price is above the cost of gas power.
China and the US prioritise security and growth
China itself has spent years building greater energy independence, with leaders highly conscious of the need to decouple its domestic energy requirements from global oil and gas markets, given its lack of domestic resources. With energy security goals in mind, it has built domestic clean-energy manufacturing and now dominates global supply chains for solar, batteries, wind and hydrogen inputs, as well as being by far the world’s largest investor in deployment. Alongside this, huge strategic reserves of oil have enabled China to drastically cut imports during this latest crisis to an eight-year low3 – this has cushioned the domestic economic impact of the war, as well as reducing the severity of the global oil price spike.
In the US, meanwhile, energy policy is dominated by the need to meet growing electricity demand – primarily a result of data centre growth as well as other factors including industrial electrification. Unlike in Europe and Asia, domestic natural gas prices have been largely insulated from the current crisis, due to plentiful domestic supply. However, while gas is expected to remain the single largest generation source at 40% into 2027, renewable generation, particularly from solar, is expected to supply the majority of growth in total US electricity generation.4 This reflects the favourable economics of renewables as well as supply chain bottlenecks for new gas generation, leading to strong growth despite political headwinds.
Sequencing, not slowdown
Recent events are changing the sequencing of the transition rather than derailing it. Mature, cost-competitive renewable technologies with clear security benefits should continue to see strong momentum. Less mature technologies dependent on subsidy, such as green hydrogen and some carbon capture applications, face a tougher environment. Columbia Threadneedle’s energy transition scoring framework, which assesses around 2,500 companies across base, slow and rapid scenarios, reflects this differentiation, with utilities and selected industrials emerging as structural beneficiaries.
The investment opportunity: Grids and storage
Further growth potential is significant. As more renewable capacity comes online, the need for transmission, distribution, storage and grid automation will intensify. Bottlenecks, from multi-year waiting lists for transformers to constrained grid connections, are already a feature of many markets. This creates opportunities across the value chain: regulated grid operators expanding their asset base; manufacturers of transformers, cables and smart-grid technologies; and the materials that make grid build-out possible, most notably copper.
A similar dynamic is playing out in transport. As EVs move closer to price parity with internal combustion engines, competitive positioning across autos is being reshaped by battery cost, range, technology strategy and supply chain access. This creates clear differentiation between winners and losers among global automakers, as well as opportunities further down the value chain – for example, in premium tyres, where heavier EVs generate greater wear and higher replacement demand.
Figure 2: Investment opportunities in grids and storage
Annual investment growth by country or region and category, 2020-2026e
Source: IEA World Energy Investment 2026. MER = market exchange rate. 2026e = estimated. Estimates and forecasts are provided for illustrative purposes only. They are not a guarantee of future performance and should not be relied upon for any investment decision. Estimates are based on assumptions and subject to change without notice.
The bottom line
The energy transition has not paused; its investment character is evolving. It is becoming more security-led, infrastructure-heavy, regionally differentiated and embedded in national industrial strategy. The war in the Middle East has accelerated these existing trends.
This has three practical implications. First, scenario analysis matters more than ever, as a single central case is unlikely to capture the range of plausible outcomes. Second, opportunities are increasingly concentrated in the physical build-out of resilient energy systems, with grids a particularly compelling focus. Third, transition finance is likely to grow as investors support high-emitting companies with credible decarbonisation plans, alongside dedicated climate solutions providers.
Recent events have not weakened the case for the energy transition. They have reframed it. Energy security and climate ambition are increasingly two sides of the same investment story, and long-term investors positioned to recognise that convergence should be well placed for the decade ahead.
