Damascus, April 3 (SANA) The repercussions of the Middle East conflict have revealed a growing paradox in global energy markets, as soaring prices have pushed countries to seek alternative supply sources, while the same conditions have hindered investment in these alternatives due to rising financing costs and heightened market uncertainty.
This paradox has become more pronounced amid continued disruptions to supply routes through key chokepoints, most notably the Strait of Hormuz, through which a significant share of global oil and gas trade passes. The situation has revived urgent questions about energy security and the balance between immediate responses and long-term planning.
High Prices Slowing the Green Transition
Luca Moro, Chief Investment Officer at the SpesX Energy Transition Fund, described the current situation as a “renewable energy paradox”, explaining that while high energy prices boost profits for companies in the sector, rising capital costs and inflation undermine project economics and reduce investor appetite.
Financial projections indicate that markets expect two to three interest rate hikes from the European Central Bank and two from the Bank of England this year, adding further pressure on clean energy financing.
Worse than the Shocks of the 1970s
Fatih Birol, Executive Director of the International Energy Agency, said the current crisis is “worse than the oil shocks of the 1970s and the loss of Russian gas in 2022 combined”, noting that global supply losses have reached nearly 12 million barrels per day, compared with around 5 million barrels per day during each of the 1973 and 1979 crises.
He added that releasing 400 million barrels from emergency reserves “only eases the pain but does not solve the problem”, stressing that reopening the Strait of Hormuz is the real remedy.
Asia Recalculates its Energy Strategy
The supply crisis has prompted several Asian countries, many of which heavily depend on Middle Eastern oil and gas, to reassess their energy options.
Alfie Asuncion Astronomo of the Philippine Nuclear Research Institute said that rising crude prices have “strengthened the push to accelerate nuclear energy efforts”, adding that nuclear power “offers greater energy self-reliance”.
Vietnam has signed a new nuclear energy agreement with Russia, Bangladesh is racing to commission its new nuclear plant, and Malaysia has revived its nuclear program with 2031 as a target date for its first reactor.
A Faster Restructuring of Global Energy
Jonathan Waghorn, a fund manager at Guinness, warned that the duration of the conflict in Iran will be “critical” in shaping the market’s future. A prolonged crisis would reinforce incentives to expand renewable energy supplies, but high interest rates remain a major obstacle.
Research by Wood Mackenzie shows that a 2% rise in interest rates could increase the total cost of electricity generation from new renewable projects by 20%.
The Ember energy research center said the restructuring of the global energy system is becoming “more urgent,” warning that continued reliance on fossil fuels could turn a temporary supply crisis into a “long-term economic downturn.”
The report noted that fossil fuel dependence causes countries to “lose at least 3% of their GDP annually” to oil imports, while electrification technologies could reduce imports by up to 70%.
Current indicators suggest that the ongoing shock may accelerate structural shifts in global energy markets, including reduced dependence on imported oil and gas, declining LNG demand in Asia, and an earlier-than-expected peak in global oil demand.
MHD
