In 2025, political barriers to sustainable investment multiplied in the wake of the United States’ withdrawal from the Paris Agreement, the relaxation of sustainability transparency requirements within the European Union, and a disappointing COP30. Nevertheless, global investment in renewable energy continued to grow, driven by the electricity demands of artificial intelligence and increased investment from ‘hyperscalers’. Consequently, clean energy stocks outperformed the MSCI World Index in 2025, as evidenced by the 33% gain posted by the Bloomberg GS Clean Energy Index, with this sector remaining highly resilient since the start of this year.

Energy security had become a strategic priority long before the conflict in the Middle East. Russia’s invasion of Ukraine in 2022 forced Europe to turn to liquefied natural gas, renewable energy and nuclear power. Keen to strengthen its strategic autonomy and secure a cheap and abundant supply of electricity, China has been expanding its production for over fifteen years. In terms of AI, this strategy already gives it an advantage over the United States.

The current conflict is exacerbating energy security risks, particularly for Europe and Asia, which are vulnerable to supply disruptions or price shocks. Damage to energy infrastructure can have long-lasting effects.

In early March, the European Union unveiled its clean energy investment strategy. The ‘RESourceEU Action Plan’ on critical raw materials, adopted in December 2025, also aims to reduce the EU’s dependence on China and to develop its energy storage and battery recycling capabilities. The bloc has just signed a trade agreement with Australia, improving access to its strategic minerals.

China has reaffirmed its commitment to renewable energy, pledging to generate 25% of its energy consumption from non-fossil fuel sources by 2030. By 2024, renewable energy sources already accounted for 56% of China’s installed capacity, and are expected to grow further over the course of the decade.

Concerns about the supply chain could boost demand for other energy sources. Countries that rely on gas for electricity generation, such as India, Indonesia and Vietnam, may temporarily switch to coal. Japan restarted the world’s largest nuclear power station in January, and some IEA scenarios predict that global nuclear capacity could more than double by 2050.

Alternative energy sources are also proving to be more competitive. In January, Saudi solar energy projects generated electricity at a cost of less than a fifth of that of electricity produced from natural gas in the United States or Europe. Solar installations are also on the rise in African countries. Economies of scale should allow costs to fall further as production increases, mirroring the almost 90% drop in the price of lithium-ion batteries over the past decade.

The conflict in the Middle East also risks disrupting food supply chains, with fertiliser shortages threatening agricultural production. It could be several months before these effects are felt on global markets. Around a third of the urea fertilisers traded globally, which supply nitrogen to the soil, pass through the Strait of Hormuz. This is in addition to the challenges posed by soil depletion and falling crop yields, caused by the harmful effects of industrial farming practices and climate change.

In light of disruptions to vital energy supplies from the Middle East – now a priority for the global economy – governments and investors should redouble their efforts to strengthen the resilience of energy, food and water systems. This will accelerate the transition towards alternative energy sources and sustainable solutions.