How the Iran War Could Scramble the Climate Tech Capital Stack

The closure of the Strait of Hormuz and sustained attacks on regional energy infrastructure are already rippling through global energy markets — with knock‑on effects for climate tech financing. Billions of dollars from Gulf states including the United Arab Emirates, Saudi Arabia, Kuwait and Qatar flow into climate tech every year via sovereign wealth funds and the investment arms of regional oil and gas giants such as Saudi Aramco and the Abu Dhabi National Oil Company. With millions of barrels of oil and petrochemical products stranded and fossil fuel revenues falling even as commodity prices spike, the ability of those institutions to deploy capital into electric mobility, clean hydrogen, alternative fuels and carbon removal is now at risk.

“there’s increasingly scarce early-stage risk-embracing venture dollars,” Johanna Wolfson, co-founder of early-stage climate tech investor Azolla Ventures, told Heatmap. She added that many strategic investors “have patient long term capital, or at least a different way of evaluating business outcomes or ROI than a typical venture investor would,” a dynamic that could be disrupted if regional revenues continue to deteriorate.

How Gulf capital currently reaches climate tech

The ecosystem linking Gulf money to climate startups has become complex and, in many cases, opaque. High‑profile moves in recent years illustrate the scale and variety of commitments:

• At COP28 in Dubai the UAE launched Altérra, which has since deployed $6.5 billion to anchor multi‑billion dollar climate funds with Brookfield Asset Management, BlackRock and TPG Rise Climate.
• Saudi pension fund Hassana invested $1.5 billion in TPG Rise Climate.
• The Public Investment Fund took a roughly $2 billion stake in Tesla in 2018 and owns a majority share in Lucid Motors, which plans to begin manufacturing in Saudi Arabia by year’s end.
• Aramco Ventures led the seed round for direct air capture company Spiritus and has backed Form Energy, Boston Metal and Rondo Energy.
• Abu Dhabi Investment Authority funded utility‑scale solar company Arevon; Mubadala backs offshore wind developer Skyborn Renewables; and the Qatar Investment Authority co‑led the Series D for EV battery producer Ascend Elements.

Sovereign wealth funds and oil‑and‑gas investment arms often invest through subsidiaries or as anonymous limited partners, making exact capital flows difficult to trace. That ambiguity can mask how exposed climate tech venture and project finance are to swings in fossil revenue.

Outlook

Analysts and investors expect a near‑term slowdown in regional commitments to riskier, early‑stage climate bets. “Those looking to raise capital in the region should probably allow for some slow responses for a while,” Paul O’Brien, former deputy chief investment officer at the Abu Dhabi Investment Authority, told ImpactAlpha. He added, optimistically, that “deal flow should resume soon after the Strait of Hormuz opens.”

Daan Walter, principal at the clean energy think tank Ember, noted the strategic rationale behind Gulf investments: “It’s a really good hedge for their own oil business, and many U.S. banks are highly exposed to fossil fuels.” Still, with pipeline disruptions, damaged infrastructure and rising costs for solar inputs such as aluminum, startups and project developers that rely on Gulf capital face a period of uncertainty — and in some cases, managed retrenchment — until regional revenues and shipping routes stabilize.