By Ariel Cohen
On April 4, Donald Trump posted on Truth Social: "Remember when I gave Iran ten days to make a deal or open the Strait of Hormuz. Time is running out..." Markets have retreated amid instability in the Middle East, and it doesn't seem — in the near future — to calm investors' nervousness. However, it's not just a short-term shock reaction. It's a more profound change.
With the Trump administration having put an end to the Biden-era green energy transition, we are not moving gradually, progressively towards renewables, but not everything is frozen either. The picture is more complex: we are seeing a development shaped by geopolitical risks, as well as capital, technology and supply constraints. The war has highlighted the need to accelerate the electrification of transport, expand the use of nuclear energy and strengthen strategic energy reserves.
How governments are adapting to a global energy crisis
As the crisis continues and states begin to face supply shortages, the risk of a broader global energy disruption increases. Governments are now forced to address an urgent issue: how to secure energy quickly in an increasingly volatile environment.
The effects are already being felt globally. The Philippines has declared a state of energy emergency, saying that reserves are sufficient for 45 days. Asian countries are implementing urgent measures to save energy. Additional pressure is expected, as several LNG plants in Australia faced outages due to storms towards the end of March, caused by a cyclone. UK Finance Minister Rachel Reeves has warned G7 countries to move faster on clean energy in order to protect themselves from future price fluctuations and volatility, stressing the long-term role of nuclear power and renewables.
Direct action versus long-term policy
While hydrocarbons may be hit by the geostrategic crisis, this structural shift will not happen in the foreseeable future. Right now, the first priority is to replenish the missing hydrocarbons from the market. Capital may leave the Gulf states, but it is transferred to other oil producers, not to green energy and nuclear power.
Energy systems cannot be transformed overnight. EU Energy Commissioner Dan Jorgensen has warned governments to prepare for a "prolonged shutdown", and governments are forced to act under strict time constraints, especially given Europe's continued dependence on energy imports.
While renewables may remain at the heart of the long-term strategy, provided cost and storage issues are resolved, they cannot be deployed quickly enough to address the immediate shortages faced by states. Infrastructure for solar, wind, and nuclear power would take years to license, build, and integrate into the grid. Meanwhile, fossil fuel production is typically implemented more quickly by leveraging existing infrastructure, such as generating facilities, pipelines, and transmission networks. In times of crisis, governments don't choose between clean and conventional energy — they choose what can be done quickly to avoid a shortage.
Fossil fuels will survive
Many countries emphasize immediate solutions. As they did during Russia's invasion of Ukraine in February 2022, Germany and Japan are considering increasing coal production to cope with rising prices and stabilize supply, while Italy will postpone the closure of coal plants for over a decade. Meanwhile, the US has temporarily eased sanctions against Russian oil. Overall, these reactions suggest a broader reality. In times of crisis, energy security depends on diversification and requires dependence on multiple energy sources.
There is precedent in these energy changes. In 2022, Russia attacked Ukraine, and Germany temporarily put coal-fired power plants back into operation to compensate for the decline in gas supplies. Although Germany has maintained its long-term commitment to phase out coal by 2038, recent developments suggest a reassessment of this timeline. German Chancellor Friedrich Merz has appeared eager to rethink the country's energy strategy, including reassessing planned coal plant closures and accelerating the construction of gas-fired power plants as an emergency measure. However, Germany still refuses to take the next logical step and return to nuclear power production due to the influence of the Green Party, which is strongly "anti-nuclear".
The persistence in the use of fossil fuels is also reinforced by the behavior of capital. Companies that have spent decades developing know-how in the field of oil and gas infrastructure are much more likely to continue investing in these systems than to switch entirely to renewable energy. For now, while European energy importers are paying record prices, major fossil fuel companies such as Shell, BP and ExxonMobil are making big profits, which are likely to be reinvested in oil and gas production, where returns are more predictable. In practice, it is the new capital that is moving towards renewable energy. According to the International Energy Agency, the world's 250 largest oil and gas companies own just 1.42% of the world's renewable energy operating capacity, and more than half (54%) of the renewable capacity held by these companies was acquired through acquisitions rather than through the development of new projects.
Where will energy shift in the long run?
These shifts should be seen as short-term responses to a string of pressures, and not as a permanent reversal of the energy transition. Until the crisis is resolved and subsided, governments will rely more heavily on fossil fuels.
However, as the vulnerability of the system is increasingly exposed by these energy crises and further disruptions are possible, the arguments in favour of investing in domestic energy sources, including nuclear and renewable energy, with a view to reducing exposure to future crises are strengthened.
Where should investors turn their gaze?
The energy transition has an impact on how investors allocate their capital. As countries invest in both traditional and clean energy sources, the demand for certain raw materials, such as uranium, lithium, and rare earths, is expected to increase. Oil and gas production outside the Middle East will grow significantly, especially in the Atlantic basin. From Angola, Mozambique, and Nigeria to Argentina, Brazil's offshore regions, Guyana, and Venezuela, oil and gas fields will be exploited.
Rather than completely replacing fossil fuels, the next phase of the energy transition will likely involve "all of the above," with the development of multiple interconnected systems. For investors, this means that opportunities are not limited to renewable energy sources alone. Oil and gas, as well as materials and infrastructure, are essential to support a more diversified energy mix. In this environment, the advantage will lie not only in monitoring global markets, but also in identifying, understanding, and anticipating where national energy strategies can be most effectively transformed into investment opportunities.
Forbes
