Energy security, not climate ambition, has once again become the dominant force shaping global energy markets, government policy and investment flows. This shift is now visible across every major economy, from Europe’s urgent rush to secure gas supplies to China's renewed expansion of coal capacity and the Gulf regions accelerated investment in large integrated refining and petrochemical complexes.

The Mashreq Executive Insights report for the third quarter of 2025 captures a reality that the industry has been sensing for some time. Climate objectives remain important, but when confronted with geopolitical shocks, economic fragility or supply disruption, governments and companies revert to security as the overriding priority. This recalibration will shape the trajectory of the energy transition for years to come.

Uneven flow

The world is no longer moving in a coordinated or predictable manner toward a clean energy future. Instead, the transition is unfolding in an uneven and politically fragmented landscape where short-term shocks repeatedly override long term commitments. The market must therefore treat uncertainty as a structural feature of the decade, not an episodic deviation.

Investment strategies, pricing expectations, and project timelines will increasingly be anchored on how security concerns interact with climate ambitions, rather than on climate goals alone.

This fragmentation is visible across all regions. Conflicts, sanctions, supply chain disruption and shifting alliances have produced sharply divergent energy pathways. Some countries are accelerating renewables at record speed, while others are expanding fossil fuel capacity to stabilise their systems.

This divergence creates volatility across technology choices, commodity flows and financing decisions. Investors now face the challenge of selecting markets not on technological potential but on political predictability. As a result, capital is concentrating in jurisdictions capable of signaling consistent direction, even if their climate ambitions are modest relative to others.

Oil market

At the same time, the oil market is undergoing a structural transformation. While demand growth has slowed to around zero-point five percent a year, the sectors that depend most heavily on oil such as aviation, petrochemicals and heavy transport continue to show resilient consumption. The issue is not collapsing demand but the redistribution of where value is generated.

Europe’s ageing refineries are shutting down because they lack competitiveness and reinvestment capacity, while Middle Eastern producers are building advanced integrated complexes that capture greater value from each barrel. Rather than disappearing, oil is becoming more specialised, and regions that can deliver this higher value production are gaining long term strategic importance.

China plays an equally important role in shaping the next phase of the global energy system. Although it leads the world in solar power, electric vehicles and grid scale investment, it also approved close to one hundred gigawatts of new coal capacity. This dual track strategy is not a contradiction but a security plan that prioritises self-sufficiency and manufacturing dominance.

Renewable bottlenecks

For global markets, this means continued strong demand for fossil fuels alongside massive demand for metals, minerals and materials required for electrification. China is not transitioning away from fossil fuels but toward diversified security. Markets must price this duality accordingly.

Renewables continue to expand rapidly, but a major structural weakness is slowing their full integration. Grids and storage infrastructure are dangerously underdeveloped. Only sixty cents of every dollar invested in renewables is being spent on grids. This mismatch creates transmission constraints that limit how much renewable energy can be absorbed into power systems. The result is a dependence on gas fired power to stabilise intermittent supply.

Until grid investment accelerates dramatically, renewables will not be able to displace fossil fuels at the pace originally forecast. The bottleneck is not a lack of renewable capacity but insufficient infrastructure to deliver it.

Cost pressures are also reshaping the technology landscape. Offshore wind projects have been delayed or cancelled across Europe and the United States due to high interest rates, inflation and supply chain stress. This sector, once the flagship of large scale decarbonisation, now faces severe financing challenges.

By contrast, technologies with faster installation timelines and lower capital intensity such as solar continue to advance. These shifts will influence which industries attract investment and which require restructured policy support to remain viable.

Nuclear power is returning to prominence as governments seek stable, low carbon baseload generation to complement intermittent renewables. Years of underinvestment are giving way to a more pragmatic recognition that large power systems require firm capacity to maintain reliability.

Nuclear energy offers long operational lifetimes, predictable output and resilience against fuel price volatility. Its resurgence signals a broader market acknowledgment that no single renewable technology can meet future demand on its own.

The future of heavy industry, aviation, shipping and long-distance transport depends on scaling carbon capture and low carbon hydrogen. These sectors cannot decarbonise through electrification alone. Synthetic fuels made from captured carbon dioxide and hydrogen offer a pathway forward but remain expensive. Commercial scale adoption will require strong policy frameworks, subsidies and long-term offtake agreements. Without these measures, hard to abate sectors risk falling behind the rest of the transition.

Decisive factors

Governments are also quietly reassessing their short- and medium-term climate targets. Many now recognise that achieving net zero milestones for 2030 or 2035 is unrealistic given current economic and political headwinds. While the year 2050 target remains central, interim goals will be softened, delayed or reframed. This will influence regulatory pressure, company strategies and investor expectations across energy intensive industries.

Ultimately, the decisive factor shaping the transition is not the ambition of climate policies but the stability with which they are implemented. Markets will reward jurisdictions that provide predictable frameworks for investment in renewables, nuclear, hydrogen, carbon capture and advanced grids.

Those with fragmented or inconsistent policy environments will face higher financing costs, slower project development and reduced investor confidence. The next decade of the global energy transition will be defined not by who sets the highest goals but by who delivers the most stable path toward them.

(Sajjad Jafri is Head of Energy and Commodities, Mashreq. Any opinions expressed in this article are the author's own)

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