In addition to the humanitarian toll of the conflict in Iran, the world is currently confronting the impact that trade disruptions in the Strait of Hormuz are having on energy markets. To this point, oil importing nations in Asia are bearing the brunt of these disruptions, with many of these countries instituting measures like school and work closures, transportation restrictions, and manufacturing cutbacks in order to save on fuel costs. These dynamics underscore the strategic importance of energy independence and could ultimately result in meaningful shifts in how various countries power their economies.
While the conflict may lead governments to see the value of diversifying energy sources in a new light, the search for alternatives to fossil fuels is not new. Along with environmental concerns, reliance on finite resources imposes limitations on power generation capacity. Those limits are at odds with groundbreaking technological advancements in artificial intelligence, which are propelled by infrastructure that requires vast amounts of energy to operate. As illustrated in the chart above, more than half of newly installed energy capacity in the last five years has come from renewable sources like solar and wind, and that share is still increasing. Countries like China and Brazil are leaders on this front, with 58% and 87% of their energy capacity additions coming from renewables last year, respectively. Opportunities for investment should continue to emerge as countries around the world commit capital to expanding renewable energy infrastructure, making this a trend worth monitoring for investors going forward.
