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Middle East Conflict Could Push Asia Towards Coal, Renewables, Wood Mackenzie Says

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The Middle East conflict could reshape global power markets as higher fuel costs strengthen long-term trends in renewable investment, Wood Mackenzie said in a Monday note.

The consultancy said disruptions tied to the Strait of Hormuz are increasing supply chain costs for utilities, developers, and power equipment suppliers worldwide.

Higher oil prices initially pushed up jet fuel and marine bunker fuel costs, while longer shipping routes and supplier diversification also increased equipment-delivery expenses, according to the note.

Wood Mackenzie said turbines, transformers, batteries, cables, and renewable energy components could face higher procurement costs as trade disruptions continue.

The report said import-dependent economies, including Italy, Japan, South Korea, and the UK, face greater exposure to rising wholesale electricity prices and fuel procurement risks.

Utilities in those markets could face pressure on retail margins, tariff structures, and hedging strategies as fuel price volatility persists, Wood Mackenzie said.

Asian utilities may increase coal-fired generation in the short term if liquefied natural gas supplies from Qatar and the UAE become more expensive or harder to secure.

Wood Mackenzie said policymakers may respond by accelerating investment in renewable energy, battery storage, grid expansion, cross-border transmission links, and selected nuclear projects.

The consultancy said sustained higher oil prices could improve the economics of electric vehicles, particularly across Europe and Asia, thereby strengthening long-term electricity demand growth.

Utilities may need to expand charging infrastructure, reinforce power networks, and add more flexible generation capacity if electric vehicle adoption accelerates further, the note said.

Wood Mackenzie also warned higher oil prices could raise transportation and installation costs for wind projects, particularly for nacelles, turbine blades, and heavy equipment shipments.

Despite rising project costs, governments may strengthen renewable energy policies and domestic generation targets as energy security concerns increase, according to Wood Mackenzie.

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