Gulf Investors Will Target Postwar Resilience Alongside Returns in Green Deals
The Iran war has destabilized energy markets but will accelerate Gulf state green investment, especially across the Global South.
By Jessica Obeid
Energy infrastructure has chronically been a target in times of war. The recent conflict in the Middle East, however, has elevated these assets into critical instruments of geopolitical and economic pressure. Attacks have targeted pipelines, power plants, and oil and gas facilities, alongside the instrumentalization of hydrocarbon flows, exerting significant pressure on countries in the region and disrupting global markets.
From drone strikes on Gulf refineries and liquified natural gas (LNG) complexes to the use of fuel supply as political leverage, the targeting of high-value energy assets has exposed the risks inherent in fossil fuel-dependent systems and oil rentier economic models.
Attacks on Saudi Arabia’s Abqaiq facility, the world’s largest single facility crude oil stabilization plant, Qatar’s Ras Laffan, the world’s largest LNG complex, and the United Arab Emirates’ Ruwais refinery, among others, have demonstrated that concentrated energy infrastructure is a risk multiplier. The Strait of Hormuz, through which 20–30% of global oil and around 20% of LNG exports flowed before the 2026 Iran war, has emerged as a major chokepoint for the global economy. The negative consequences have cascaded, with oil prices exceeding $120 per barrel, supply chains disrupted, and strategic reserve releases reaching their limits. Almost 1 billion barrels of crude oil were taken off the market during the war, amounting to the worst energy supply shock in history.
From Climate to Security
The conflict will accelerate a fundamental shift in the driver behind green investment. Energy security will become the most powerful enabler of the global energy transition.
The greatest challenge of conflict-driven disruptions is that their effects can endure long after the fighting stops. The end of the Iran war and the reopening of the Strait of Hormuz will not restore the prewar dynamics of the global energy market. The conflict has already redirected policy and investment toward sustainability, efficiency, and resilience. In the medium to long term, the demand for localized and clean energy systems will increase, driven less by environmental priorities and more by security concerns.
Defense budgets are set to expand at the expense of green financing, widening the funding gap when the Global South needs it most.
Historically, the dominant narrative around green investment has been largely Western-led, centered on environmental, social, and governance (ESG) mandates, carbon targets, and climate diplomacy. The Iran war has underscored the importance of economic and energy security, which have long driven green investments, particularly in clean energy, in many developing countries. Securitization is the key engine that will enable a sustainable transition and focus on green investments. States do not abandon security imperatives for political convenience.
This reframing has significant implications for capital allocation. Investments previously evaluated on decarbonization metrics and ESG returns are being stress-tested against geopolitical risk models. Security, however, requires significant capital. This comes at a time when global green financing is under increasing strain and becoming more fragmented.
Green Capital Retreats
As the need for green investments expands, the financial capacity and political will to meet these needs are shrinking. Western capital is scarcer due to shifting priorities in the U.S. and tightening fiscal constraints across Europe. Defense budgets are set to expand at the expense of green financing, widening the funding gap when the Global South needs it most.
Globally, mitigation finance for developing countries must increase by a factor of 4 to 8 to reach $1.6-3.2 trillion annually by 2030 to meet climate targets, while adaptation needs are estimated at $140-300 billion per year. Adaptation finance reached $32.4 billion in 2022, a three-fold increase from 2016 levels but far below the amount needed.
Green financing has long failed to mobilize at the scale or speed required to close the growing shortfall between climate needs and available capital, and the situation is deteriorating. Between January 2025 and 2026, the U.S. withdrew from major international climate financing mechanisms, including the Green Climate Fund (GCF), the largest climate fund, and the Loss and Damage Fund, established in 2022 as climate damage compensation fund, while also cutting funding for climate and environmental projects both domestically and internationally.
Green development frameworks in Africa, South Asia, and Southeast Asia, which have been built on the pledges of sustained Western capital flows, are now facing a significant funding gap. For example, the Just Energy Transition Partnerships (JETPs) has secured $50 billion in total pledges from the U.S., Canada, and several European countries, yet only $9 billion has been distributed. In 2025, the U.S. pulled its financial contribution to JETP.
More broadly, green financing has long been associated with complex frameworks, strict conditionalities, and lengthy application and implementation timelines. Yet the energy transition in the Global South requires large-scale capital, technology transfer, and capacity building that cannot afford to wait for Western foreign policy priorities to rebalance.
Strategic Positioning
As Western climate finance contracts and energy security concerns intensify, Gulf states will be the emerging architects of green investments in the Global South. Their strategy is to reduce risk through geographic and industry diversification while pursuing long-term influence in global energy markets.
Globally, green financing has largely prioritized clean energy projects, and Gulf states have increasingly become key players. Saudi Arabia’s Public Investment Fund identified $19.4 billion in green investment requirements, while Saudi clean energy champion ACWA Power has developed around 53 gigawatts (GW) of renewable energy projects across 14 countries in Africa and Asia. Similarly, the UAE’s renewable energy leader Masdar has delivered around 65 GW of renewable energy capacity globally, with projects spanning Morocco, Egypt, India, Pakistan, and Uzbekistan.
At the same time, the war’s exposure of vulnerabilities across centralized fossil fuel infrastructure is elevating the strategic importance of clean energy, including decentralized energy systems. Solar generation, battery storage, and distributed microgrids are structurally more resilient than centralized hydrocarbon networks vulnerable to chokepoints, sabotage, and supply disruptions. Investments in these systems across the Global South can serve as a long-term energy security hedge that aligns directly with Gulf strategic interests and capital capabilities.
The conflict will shape the architecture of a new global energy order, increasingly influenced by the Gulf. As Western multilateralism wanes, Gulf capital may step into a role that has been historically dominated by development banks, export credit agencies, and bilateral aid programs.
For the Global South, this shift presents a timely opportunity, especially if investment frameworks are structured to build local capacity and supply chain resilience. Technology transfer, local content, and workforce development must therefore become pillars of these partnerships.
For the Gulf, this will be the most consequential repositioning of economic influence since oil wealth first accumulated in the 1970s. As global markets become more fragmented and volatile, Gulf states will also seek more geographically distributed and diversified investment portfolios to reduce exposure to concentrated risks. The difference is that this time, the exported resource is energy resilience itself. Amid geopolitical instability, climate vulnerabilities, and capital retrenchment, resilience may become the most valuable commodity.
Jessica Obeid is a Gulf Committee - Policy Council member of the Rihla Initiative for Green Economic Growth. Obeid is an energy engineer and strategist with a portfolio career spanning over 17 years of experience from complex infrastructure to high-level policy and regulatory reform, contributing to the development of clean energy systems in the Middle East, Africa, and Europe.
Section: (rihla-initiative) Photo: Aleksandar Pasaric