The conflict that erupted on 28 February between the US, Israel and Iran is shaking global energy markets.
In just a few days, the escalation has led to attacks on ships and partial blockades in the Strait of Hormuz, through which around 20% of the world’s oil supplies pass. Key liquefied natural gas facilities in Qatar and refineries in Saudi Arabia have also been temporarily paralysed by attacks. Oil and gas prices have risen accordingly.
Although the epicentre of the crisis is in the Middle East, its effects will also be felt in Latin America and the Caribbean, a region in the midst of a rapid transition to clean energy.
The current energy volatility could have contradictory effects on that transition. On the one hand, logistical delays can make investments in clean energy more expensive. On the other, rising fossil fuel prices can strengthen the economic competitiveness of renewable energy.
Latin America and the Caribbean is starting from a relatively favourable position. Around 70% of the region’s electricity generation comes from renewable sources. Investment in clean energy in the region reached USD 70 billion in 2025, according to the International Energy Agency. However, the agency estimates it will be necessary to mobilise around USD 150 billion annually by 2030, in order to decarbonise the energy sector in line with the region’s targets.
The potential exists. According to the business data analyst BNamericas, the region has approximately 1,094 large-scale renewable energy projects (excluding hydropower) in the early stages of development, worth a combined investment of more than USD 500 billion. Of these, 176 are either under construction or in the advanced stages of preparation.
Although the Strait of Hormuz is not a major route for renewable technology components, global logistical disruptions have significant indirect effects
This outlook for the region coexists with the persistence of fossil fuels. At least 190 companies in an array of countries are still exploring or developing oil and gas fields in dozens of Latin American or Caribbean countries. In addition, more than 8,800 km of oil and gas pipelines are planned – mainly in South America – as well as 19 new liquefied natural gas export terminals. In contrast, the region seems to have almost completely ruled out the construction of new coal-fired power plants.
While the impact of the current conflict on fossil fuels is clear, the more than 1,000 renewable projects under development are not immune to these disruptions either. Although the Strait of Hormuz is not a major route for renewable technology components, global logistical disruptions have significant indirect effects.
The partial blockade of the strait has raised maritime insurance costs, increased freight rates on alternative routes, and caused congestion in ports and supply chains. Most solar panels, wind turbines, batteries and inverters arriving in Latin America are exported from China via the Pacific Ocean or the eastern Indian Ocean. But disruptions elsewhere can still cause logistical delays and higher transport costs, potentially slowing down the implementation of renewable projects.
However, the energy crisis resulting from the conflict may also accelerate the transition in some contexts. Rising fossil fuel prices improve the competitiveness of renewable energy. In regions highly dependent on energy imports, this could drive the adoption of solar and wind technologies.
Examples include the expansion of solar farms in the Caribbean islands and Chile. Many industries which previously relied on gas are increasingly switching to clean power sources such as solar thermal systems.
Geopolitical tensions also highlight a structural advantage of renewable energy: its local nature. Notwithstanding short-term logistical issues a conflict may cause, renewable power generation does not depend on vulnerable trade routes or highly concentrated markets. This strengthens the energy resilience of territories and could attract more international financing for green initiatives in Latin America and the Caribbean.
The world is undergoing a period of accelerated innovation driven by multiple crises: the Covid-19 pandemic, rising geopolitical tensions and the growing climate impact of greenhouse gas emissions.
In this context, the transition to renewable energy-based economies is not only a climate option but also a security strategy. Governments must prioritise investments in renewable energy, storage, electricity grid modernisation and transport transformation. This will not only reduce emissions but protect their populations from external shocks.
The current crises serve as a reminder that diversifying energy sources is key to building sustainable, resilient energy systems that are less vulnerable to geopolitical tensions.
Latin America and the Caribbean have an historic opportunity before them: to take advantage of this situation and consolidate their position as a strategic centre for global energy sustainability. With abundant solar, wind and hydro, as well as critical mineral resources such as lithium, the region can become an energy transition laboratory that demonstrates how to strengthen resilience to geopolitical risks while generating green jobs, inclusive prosperity and true energy sovereignty.
