The rise of AI, renewables demand, and geopolitical conflicts are all major catalysts in the evolving energy landscape this year. Instability in the Middle East is causing fluctuating oil and gas prices. Falling battery storage prices and intensifying AI usage is causing an uptick in renewables production. And AI-driven data center construction is prompting surges in electricity demand, upending power markets.
HSBC energy experts Kim Fustier and Meike Becker sat down with AlphaSense earlier this month to discuss these major energy industry themes in an exclusive fireside chat. Below, we examine their 2026 outlooks on oil and gas, renewables, and the power market.
Related Reading: Global Oil and Gas Market: Iran War Fallout and Future Outlook
Oil and Gas Glut Predictions
The energy supply shock that occurred because of the Iran war is likely to be short-lived, according to HSBC energy analysts. HSBC cut its Brent oil forecast to $80 a barrel (from $95/b) for 2026 and $65 a barrel (from $75/b) for 2027 with predictions for a return to surplus by Q4 2026. Weaker demand, particularly from China, along with strong exports outside the Gulf, is driving the quicker-than expected rebalancing of the oil markets despite the ongoing conflict. And last month, the International Energy Agency cut its global oil demand outlook for this year due to higher fuel prices and supply disruptions.
“There’s more sellers than buyers. And the medium-term glut narrative is coming back, and it's coming back surprisingly quickly as soon as you had the US-Iran MOU,” said Kim Fustier, Senior Global Oil and Gas Analyst at HSBC.
By the end of the first quarter of 2027, energy stocks could rise back to their February 2026 peaks, erasing the drawdowns that happened last March through the summer, according to HSBC research. The AlphaSense Energy Sentiment Index, which tracks management and analyst tone across earnings calls for six major energy companies, declined 13 points in the second quarter amid the Iran War. Still, the Middle East geopolitical conflict is rapidly evolving. The US and Iran have restarted strikes in recent weeks, muddying the economic outlook for oil prices and inflation.
The Middle East conflict has also put renewed focus on the need for oil majors to diversify away from that region and into other areas.
“Anything that's already in progress, the Qatari LNG expansions, for example, they'll continue. But any growth options have to come from outside the Middle East,” Fustier said.
ExxonMobil, Chevron, and other energy companies have accelerated their searches for new oil and gas prospects outside the Middle East in places like Africa, Eastern Europe, and Latin America. They are also likely to consider projects that ensure resilience and optionality around infrastructure in the Middle East, which could include pipelines built to bypass the Strait of Hormuz, Fustier said.
Data Centers and Power Markets
The data center boom is expected to continue in 2026, driving increased energy needs. Both Europe and the U.S. are experiencing rising demand from data centers, but the European market handles connection requests better, according to Meike Becker, Head of European Utilities and Renewables Equity Research.
Becker noted that Europe's power markets have been investing in grids and renewables for years even amid stagnant electricity demand, making it easier for new data centers to connect since both networks and renewables capacity are already built out there. The U.S., on the other hand, has lacked grid investment, which makes it harder for the country to be able to fulfill the data center demand over the next few years.
Europe and the U.S. have had 20 years of completely flat electricity demand, no growth and particularly no meaningful large load. Europe has invested in the networks nonetheless and in renewables for 10 to 20 years because they did expect growth from the energy transition, which has never come.
“Any data center that wants to connect in Europe, it's actually easier to connect to because the investment machine is running on both sides, the networks and the renewables. The U.S. is much less so — you have more immediate visible demand from the data centers,” Becker added.
Data centers are projected to represent about 9.1% of total U.S. energy usage by 2030, up from 4% of total load in 2023, according to the Electric Power Research Institute. The surge in electricity demand from data centers is colliding with an aging and decentralized power grid. This has caused interconnection timelines to increase to as much as five to seven years and U.S. large power transformer lead times have lengthened to three to five years due to supply chain bottlenecks from increased data center demand, according to HSBC.
The Rise of Renewables
Renewables and battery storage are key beneficiaries of the data center boom. More than 50% of new global data center capacity between 2023 and 2035 is expected to come from renewable sources. And corporate investment in green energy is undergoing a massive expansion, with global clean energy capex reaching a record $2 trillion last year. Hyperscalers are driving this investment, accounting for nearly half of all corporate renewable power purchase agreements.
Within the renewable industry, solar and battery storage are both continuing to gain market share due to falling costs, according to Becker. Storage costs have decreased due to cheaper battery costs from advancements in the electric vehicle industry. This has made storage a strong alternative to gas peaker plants, Becker said. Peaker plants are power plants that can rapidly switch on to supply electricity to the grid during periods of high demand.
“There's really no reason to have a gas peaker plant at this point. Storage does the job much more cheaply, and if you're…leaning into AI and…embracing flexible demand, and doing away with the idea that demand is as fixed as it is today, it really shouldn't be there in the future,” Becker said.
Across the U.S., utilities have already been replacing gas peaker plants with large-scale battery storage. Batteries can provide the same short-duration power at a lower cost and without pollutants. Battery installation can also be achieved within months, while supply chain delays have caused a backlog of gas turbine shipments.
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