Join War on the Rocks and gain access to content trusted by policymakers, military leaders, and strategic thinkers worldwide.
How many energy crises will it take before we stop betting our economies on a fragile oil market?
The U.S. and Israeli war with Iran quickly morphed from a regional conflict into a global energy shock. Oil and gas markets have been volatile since the start of the war, with Brent crude oil prices rising 59 percent since Iran’s effective closure of the Strait of Hormuz, one of the world’s most important energy chokepoints. In the first half of 2025, about one-fifth of the world’s oil and liquified natural gas passed through the strait. Now, five weeks into the conflict, attacks on energy infrastructure have further strained global markets, most notably the Iranian strike on Qatar’s Ras Laffan gas complex that destroyed 17 percent of the country’s liquified natural gas export capacity for up to five years. Although much of the impact will depend on how long the strait remains closed, experts caution that the Iran war is causing the worst energy shock of all time.
The current energy crisis is exacerbated by the fact that global markets have not yet recovered from the last global energy shock in 2022. After Russia’s full-scale invasion of Ukraine, the G7 sanctions regime against Russian oil bifurcated the global market, creating a system where only certain countries were allowed to buy certain barrels. Today, between 15 and 20 percent of global oil supplies are under some form of U.S. sanctions. Now, roughly 20 percent of non-sanctioned volumes are stranded. The International Energy Agency’s March oil market report cut its 2026 demand growth forecast due to higher prices and demand destruction.
After Russia’s invasion, Europe willed itself out of energy dependence on Moscow by replacing lost volumes with safer and more expensive imports of liquefied natural gas from Norway, Qatar, and the United States. Until Qatar can repair its facilities and safely begin exporting, these supplies have been removed from the market. As a result, consumers of both oil and gas in Europe and Asia will be competing for every last drop of available stocks.
World leaders and analysts should not have been surprised by the swift descent into global crisis. When Russia invaded Ukraine in February 2022, the obvious lesson was that dependence on hostile or coercive petrostates was dangerous. But the larger takeaway from that conflict and resulting energy crisis was broader and more uncomfortable. Although Europe drastically reduced dependence on Russian oil and gas, the global energy system remained organized around fuels whose production and movements are concentrated in a small number of states, infrastructures, and chokepoints. The current crisis demonstrates that advanced economies should hasten the transition to renewable energy sources and away from hydrocarbons.
In our 2022 article in these pages, Marco Giuli and I argued that the most secure energy policy was not simply to replace Russian supply with other expensive imports, but to reduce energy demand, accept some degree of austerity, and move faster towards systems less exposed to geopolitical shock events — ones based on more localized renewable energy production including wind, solar, and nuclear. After 2022, states should have prioritized using less insecure fossil fuel-based energy, rather than buying it from other places. The resulting energy crisis from the Iran war now suggests that this lesson was not fully adopted.
As a major producer and exporter of both oil and natural gas, the United States was a net winner of Europe’s energy crisis in 2022. American consumers were largely unaffected by the crisis and U.S. producers had a windfall exporting liquefied natural gas at premium prices to desperate European buyers. But today’s scenario is different, and most Americans have already experienced an early consequence: high prices at the gas pump. Researchers at Stanford estimate that if transit through the strait remains limited through April 10, the average American household will pay $857 more for gasoline over the rest of the year. Americans will also likely pay at least 20 percent more for airline tickets, as jet fuel has surged approximately 75 percent since the start of the war.
On March 11, President Donald Trump authorized the release of 172 million barrels of oil from the U.S. Strategic Petroleum Reserve when Brent crude hit $92 a barrel, in an effort to calm the markets. Under this scheme, eight companies, including Shell and BP, took the initial tranche of crude from three Reserve storage sites on March 20 and will eventually return the borrowed amount to the Reserve with an additional in-kind payment. The Reserve will continue to be tapped over the next 120 days, but oil prices are headed towards a record month’s gain, and observers believe oil could rise to $150 a barrel if the strait remains closed for another month. At that point, there is little Washington can do to insulate the American public. Strategic stockpile releases can smooth market panic, but they cannot recreate normal shipping conditions or ease war zone risk premiums.
Energy price shocks quickly become food and industrial shocks. Already, the conflict has choked the global petrochemical supply and raised plastic prices. Energy-intensive industries such as fertilizers, plastic, transport, food, and pharmaceuticals are all affected by high energy prices and the maritime transit chokepoint. Bahrain, Oman, Qatar, and Saudi Arabia are critical exporters of fertilizers including urea and ammonia. Natural gas is a primary feedstock for nitrogen fertilizer: If the crisis persists, global fertilizer prices could average 15–20 percent higher in 2026.
As in 2022, the costs of the energy shock are unequally distributed. Because most of the crude and liquified natural gas flowing through the strait is bound for premium Asian markets including China, India, Japan, and South Korea, large importers in this region are under pressure from inflation and weak currencies, while low-income importers have much less ability to protect consumers or to bid aggressively for replacement cargoes. To prevent blackouts, the Thai government ordered coal-fired plants to reopen at full capacity and is subsidizing energy costs to help shield consumers from price shocks. Bangladesh is similarly increasing coal-generated electricity. Developed Asian economies are also raising their usage of coal. Last week, South Korean officials announced that they would lift their cap on coal-fired power generation and raise nuclear power plant utilization to 80 percent. China has also tightened fuel export restrictions to protect its domestic market.
Like 2022, richer countries are protecting their own consumers while poorer importers are forced into adopting energy austerity. Already, we are witnessing poorer, more import-dependent economies undertake emergency conservation measures: Bangladesh, Cambodia, the Philippines, Sri Lanka, and Thailand have all already imposed limits on air conditioning, and most Southeast Asian countries have asked or mandated consumers to limit energy demand at peak utilization times.
Western economies have not yet made appeals for conservation. But as in 2022, it is essential that they avoid policy mistakes that exacerbated the 1973 oil crisis. Slashing fuel taxes, subsidizing fuel prices, and competition for energy stockpiles did not build a resilient system. It merely delayed the next strategic energy crisis.
The Iran war exposes a central vulnerability in today’s energy system beyond lost production and coercive producers: the transit risk of energy systems dependent on physical molecules. Oil markets do not react only to barrels that are physically destroyed or withheld: They also react to the fear that they will not move due to shipping delays, rising freight rates, refinery disruptions, or when commercial operators decide that they cannot accept the risk of voyage. In 2022, Russia’s assault on Ukraine highlighted the danger of pipeline dependence and the mistaken assumption that energy interdependence would reduce the likelihood of war. The current crisis presents a maritime version of the same problem.
A prolonged disruption to the Strait of Hormuz is an energy catastrophe, potentially removing 13–14 million barrels of oil per day from the market. While it is true that today’s crisis is unfolding in a world with more diversified oil and gas supplies than in previous decades, this greater flexibility does not remove the central danger of a lengthy crisis centered on Hormuz. Military options to reopen the strait, including seizing Kharg Island and possibly mine-clearing operations, will not necessarily solve the commercial crisis. Given the sustained attacks on energy infrastructure in the region by all parties, it is unclear when shipowners, insurers, traders, and customers will have the confidence to send their ships through the strait. If this uncertainty persists, shipping will remain constrained, and prices will remain high.
The policy discourse of energy transition and energy conservation is often framed in moral or climate concerns. The current U.S. administration has dismissed it altogether because of this language. But the security logic for transition and faster electrification is also about reducing exposure to coercion, and this argument is very hard to dismiss after two major hydrocarbon supply shocks in the past four years. Electrified systems are not invulnerable, but they are generally less exposed to maritime bottlenecks and global fuel price spikes. Distributed grids, storage, efficiency, and interconnectors build resilience through redundancy and infrastructure depth rather than through armed management of scarcity.
As others have noted, this energy crisis raises the strategic premium on local electrification and non-hydrocarbon power, while simultaneously disrupting the flow of inputs on which the clean energy supply chain depends. Of course, transitions take time and the current crisis demands immediate action. But this was also true in 2022 and did not invalidate the argument for demand reduction and structural change of the global energy system. Today, in the context of the energy crisis precipitated by the Iran war, some emergency measures such as the Trump administration’s authorization of the delivery and sale of previously sanctioned Russian crude and stockpile releases may be warranted. But governments should not mistake crisis management for energy security strategy.
Now, in the wake of the Iran war, it is starkly evident that diversifying away from dominant hydrocarbons producers but failing to hasten the transition away from hydrocarbons as the primary input to energy systems is a mistake. A global economy that is organized around scarce, concentrated, and easily disrupted fossil fuel flows will always be vulnerable. Ironically, the Trump administration is aggressively reversing initiatives that sought to bolster U.S. energy security at the very time when these efforts should be intensified. This month, the administration announced that it would pay French energy company TotalEnergy $1 billion to abandon its plans to develop wind farms off the coast of the eastern United States. In exchange, TotalEnergy will invest that money into U.S. oil and gas projects. Even if the United States expands oil and gas production, the war in Iran shows that Americans will remain exposed to global energy shocks because oil is priced in a fragile, deeply interconnected global market.
Unlike the United States, Europe did not abandon the clean energy transition after 2022 but instead accelerated it through faster permitting, more renewable deployment, and greater attention to heat pumps, grids, storage, and efficiency. But Europe still relies on natural gas as a bridge fuel, leaving consumers exposed to higher energy prices because of the Iran war. Further electrification and capital investments into renewable deployment have been slowed by tighter fiscal conditions, industrial competitiveness concerns, and the tradeoff between increased defense spending and public spending on the transition. But the war demonstrates that for Europe, the only durable path to energy security is via a faster energy transition.
Today, Western governments should treat a shift to renewables and conservation as a strategy as opposed to a hardship. They should communicate honestly about how reliance on a hydrocarbons-based energy system imposes real costs, and that those costs should be managed through organized efficiency and faster electrification, rather than the fantasy that markets can painlessly substitute one set of suppliers for another. Europe’s energy crisis in 2022 should have taught us that excessive dependence on hydrocarbons is an existential security risk. The war in Iran demonstrates that altering the map of dependence is not the same as escaping it.
Emily Holland, Ph.D., is the director of the Eurasia program at the Foreign Policy Research Institute. Previously, she was the deputy political director for critical undersea infrastructure at NATO’s Maritime Command.
Image: Reza Hatami via Wikimedia Commons
