“Ukraine and Iran — Now: greater focus on risk management and less on ESG. Later: a surge in climate-related investment and opportunities.”

The current geopolitical landscape—shaped by the war in Ukraine and, more recently, by escalating tensions involving Iran and the Persian Gulf—is profoundly influencing both government decision-making and corporate strategy in relation to climate change. At its core, this shift reflects a growing tension between the imperative of energy security and the ambition of the green transition.

Geopolitical instability is shifting the priorities of governments and businesses from the green transition to energy security in the short term.

In the short term, priorities are clearly tilting toward securing energy supply, even at the cost of increased reliance on fossil fuels. Over the longer term, however, these same crises are acting as a catalyst, accelerating the transition toward alternative and more resilient energy sources.

Tensions in the Middle East are particularly critical, as they affect a central pillar of the global energy system. A significant share of global oil and liquefied natural gas flows passes through high-risk chokepoints such as the Strait of Hormuz. Unlike the war in Ukraine, which primarily disrupted Europe’s natural gas market, a conflict involving Iran carries the potential to trigger a global energy shock, affecting both oil and LNG markets worldwide. Attacks—or even the threat of attacks—on energy infrastructure across the region amplify uncertainty, driving price volatility, production disruptions, and supply chain instability.

These dynamics translate directly into higher costs for businesses. Rising energy prices impact the entire value chain—from manufacturing and construction to transportation—while insurance costs increase and exposure to political risk intensifies. In this environment, many companies are reassessing their investment priorities, placing greater emphasis on risk management and liquidity preservation rather than aggressively advancing ESG agendas. As a result, certain green investments—particularly those that are capital-intensive or have long payback periods—may slow in the short term.

The crisis is increasing costs and risks, while at the same time accelerating investment in resilient and alternative energy sources

However, this slowdown is not uniform. In sectors closely tied to energy security—such as renewables, energy storage, grid infrastructure, and LNG—investment is in fact accelerating. The rationale is clear: as the geopolitical vulnerability of traditional energy sources increases, so does the economic and strategic appeal of decentralized and domestically controlled energy systems. In this sense, the crisis acts both as a constraint and as an accelerator of the energy transition, depending on the timeframe and sector.

Attacks on energy infrastructure are perhaps the most decisive factor shaping this dynamic. They not only disrupt immediate energy flows but also fundamentally reshape how risk is assessed. Governments and businesses alike are re-evaluating their dependence on geographically concentrated energy sources and shifting toward more diversified and resilient systems. This is driving increased investment in renewables, storage, and smart grids, as well as a reallocation of capital away from regions exposed to high geopolitical risk.

The role of the United States in global climate action remains pivotal, given the scale of its economy and its technological leadership. However, even in the absence or limited consistent U.S. engagement, progress is not stalled. The European Union, China, and India retain the capacity to advance the energy transition—albeit at higher cost and potentially at a slower pace. At the same time, multinational corporations are emerging as independent drivers of change, sustaining momentum toward sustainability regardless of fluctuations in government policy.

In the long term, the crisis itself acts as a catalyst for the energy transition, creating significant opportunities—particularly for Europe.

Despite the risks, the current environment also presents significant opportunities. Investment in renewable energy, storage technologies, grid infrastructure, and emerging solutions such as hydrogen is expected to grow substantially in the coming years. Europe stands out as a key potential beneficiary, as the drive for energy independence becomes a powerful catalyst for transformation. The United States maintains an advantage due to relatively lower energy costs, attracting industrial investment, while Asia—though more exposed to energy disruptions—represents a vast market with strong demand and investment potential.

Rising energy costs and geopolitical uncertainty are directly shaping corporate investment decisions. At the same time, resilience and diversification of energy sources are emerging as critical competitive advantages for the future.

In terms of scale, the potential economic losses from a prolonged energy crisis could reach trillions of dollars, particularly in the event of major disruptions to maritime routes or energy trade through critical chokepoints. At the same time, the opportunities associated with the energy transition are also measured in multiple trillions, spanning infrastructure, technology, and new markets. These opportunities, however, will not be evenly distributed, but will vary depending on regional energy needs, cost structures, and regulatory frameworks.

Overall, geopolitical instability acts both as a headwind and as a catalyst for the energy transition. In the short term, it increases costs, uncertainty, and reliance on traditional energy sources. In the long term, however, it reinforces the need for a more resilient, diversified, and sustainable energy system—creating the conditions for deeper and potentially faster transformation than might otherwise occur in a stable environment.

For Europe, in particular, a dual dynamic is emerging. On the one hand, there is the risk of declining competitiveness, rising costs, and a short-term slowdown in the green transition. On the other, there is a clear opportunity to accelerate energy independence, develop new markets, and strengthen industrial and technological capabilities. The ultimate outcome will depend largely on the speed and effectiveness of policy responses—and on Europe’s ability to turn this period of disruption into a strategic advantage.