Renewables renewed
Posted 17 July 2026
For professional financial advisers only
For the second time in four years, war has led to a global energy crisis. But, despite the Middle East war turning the world’s attention to oil and gas, it is renewables that have benefitted the most over the last few months. The International Renewable Energy Agency (IRENA) say that renewable energy generation is now cheaper than most fossil fuel production around the world, and countries are increasingly turning to clean energy for cost and security reasons. Judging by recent strength in renewable energy stocks, investors are too.
Comparative performance
From the start of 2026 until the 1st of June, the S&P Global Clean Energy Transition Index rallied 39.7% in dollar terms, outperforming the 27.7% return for the broader S&P World Energy Index1. Both indices have fallen back slightly since the extension of the US-Iran ceasefire, but clean energy is still outperforming the broader energy sector year-to-date.
Just like during the pandemic and after Russia invaded Ukraine, a fossil fuel shortage is pushing people towards alternative energy sources. The International Renewable Energy Agency (IRENA) reported in May that sources like wind and solar are now not only cheaper than oil and gas, but, thanks to improvements in battery storage, are often able to provide round-the-clock electricity.2
Renewable energy stocks were already doing well before the US and Israel began their war on Iran. They outperformed the broader energy market in 2025, despite the Trump administration’s explicit attempts to block clean energy investment. In the US specifically, the president’s removal of clean energy tax credits actually accelerated wind and solar projects, as companies rushed to build ahead of the deadline.
The Iran war gives an extra cost incentive for governments. Many nations are now investing more heavily in renewable production and giving wind and solar providers extra tax breaks. We see this particularly in East Asia, where most countries rely heavily on energy imports.
In the UK, the Iran war has ignited political debate about whether low-emission goals should be scrapped to prioritise lower costs and energy security. The irony is that, in many other countries, this isn’t seen as a trade-off: the oil shock makes renewables a long-term cost saver and a way for oil and gas importers to become less reliant on other nations.
Investment flows
It isn’t just governments that are turning onto renewables. According to a Financial Times report, April 2026 saw more than $3bn of net inflows to global renewable energy ETFs, the largest monthly inflow since January 20213. Morningstar data shows that Europeans were responsible for most of the inflows in the first quarter of 2026, counteracting outflows from US sustainable funds.
We should point out that energy funds in general have seen huge inflows since the war began – unsurprisingly, given the spike in global energy prices. There is still a huge gap in new investments spent on oil and gas, rather than renewables. The gap is closing, however.
In May, The UK Sustainable Investment and Finance Association (UKSIF) found that 87% of its members – investment firms collectively managing £5.5tn – expect more investment in renewable energy projects as a result of the war4. 78% said that renewables are now “less risky relative to oil and gas”.
A few months ago, we wrote that renewable energy companies were profitable, but unpopular with investors. The war has made them even more profitable, and increased their popularity too.
AI boosts energy demand, oil companies see writing on the walls
The renewable energy story is also inexorably linked to AI infrastructure building. Datacentres demand ever more energy. Unsurprisingly, the best performing energy companies are the ones giving it to them. Bloom Energy, the firm that specialises in fuel cells for datacentres, has nearly doubled its share price since the start of the war. Over the last year, Bloom is up 946%5. By comparison, Danish wind farm specialist Oersted rallied much more modestly during the war and has since fallen back to roughly where it was in late February.
The interesting part, though, is that even Oersted is significantly outperforming shares of the biggest oil companies. For some oil companies, like those in the Middle East, this shouldn’t be surprising; with the Strait of Hormuz closed, they simply can’t export. However, ExxonMobil – which sources its oil and natural gas from North America and Africa – has seen its share price fall since the start of the war.
The biggest reason for this, we suspect, is that investors see the writing on the wall. Russia’s invasion of Ukraine didn’t destroy the world’s oil demand, but it did accelerate the rapid buildout of clean energy production and battery storage. That past investment is now feeding through into cheaper production costs for renewable energy. Most expect the current Middle East war to do the same.
Oil and gas companies that are able to sell their supplies are making substantial profits right now. But even so, it is hard to get excited about their long-term profitability. The very thing that boosts their profits – higher oil prices – also prompts investment into their obsolescence.
1 Returns are from 1 January 2026 to 1 June 2026, as reported by S&P Global. See:
https://www.spglobal.com/spdji/en/indices/sustainability/sp-global-clean-energy-transition-index/#overview
https://www.spglobal.com/spdji/en/indices/equity/sp-world-energy-sector-index/#overview
2Read the report: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2026/May/IRENA_TEC_24-7_renewables_2026.pdf
3Per FT: https://www.ft.com/content/9921f2b5-c910-4cec-a50f-cad453935a1a?syn-25a6b1a6=1
4Read the press release: https://uksif.org/press-release-87-of-investment-firms-expect-surge-in-renewable-energy-financing-in-wake-of-iran-conflict/
5Performance 07/08/2025 – 07/08/2026. Returns per Morningstar: https://www.morningstar.com/stocks/xnys/be/chart
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