Soheir El Sherbiny‏‏

Amid the current war in the Middle East, the global energy system continues to reel from the supply disruptions caused by the effective closure of the Strait of Hormuz, one of the world’s most critical chokepoints for the flow of oil and gas. In this context, efforts to reduce market uncertainty are raising the prospect of renewed momentum toward energy transition.This energy crisis, however, has had an uneven impact in different regions across the globe. While some areas are facing acute fuel shortages, others are experiencing sharp price increases and prolonged economic repercussions. This range of effects has, in turn, shaped how governments respond to the crisis and contributed to a growing divergence in energy policy approaches worldwide.Multiple ImplicationsThe war in the Middle East has had both direct and indirect impacts on global energy markets. The most notable of these can be outlined as follows:1. Implementation of Energy Rationing Policies in Southeast Asia: Rising global energy prices have led to what is often described as "demand destruction," forcing governments in Southeast Asia to <a href="https://www.politico.eu/article/how-the-iran-war-set-beijing-up-for-global-clean-energy-dominance/" rel="noopener noreferrer" target="_blank">reduce consumption</a> through austerity measures aimed at managing fuel shortages. These measures have included a shorter work week and energy rationing policies.Moreover, governments have come under increasing fiscal pressure due to rising energy subsidy costs, while households and industries have borne growing financial burdens.For example, the <a href="https://www.theguardian.com/world/2026/mar/18/south-east-asia-nations-conserve-energy-oil-soaring-costs" rel="noopener noreferrer" target="_blank">government of the Philippines</a> adopted exceptional measures, including cash support for public transport workers and directives requiring government institutions to cut electricity and fuel consumption by between 10% and 20%. Despite these interventions, rising prices have directly affected living standards, reducing incomes in energy-dependent sectors and increasing transportation and food costs, thereby eroding purchasing power across broad segments of the population.2. Increased Reliance on Conventional Energy Sources in Parts of Asia: With declining supplies of liquefied natural gas (LNG), several Asian countries have been forced to <a href="https://www.france24.com/en/live-news/20260324-back-to-black-facing-energy-shock-asia-turns-to-coal" rel="noopener noreferrer" target="_blank">increase their reliance on coal</a>—which is often available domestically or regionally—as a means of avoiding power outages and shielding consumers from price shocks.For instance, South Korea has eased restrictions on coal-based power generation, while <a href="https://www.france24.com/en/live-news/20260324-back-to-black-facing-energy-shock-asia-turns-to-coal" rel="noopener noreferrer" target="_blank">Thailand</a> is preparing to restart two previously suspended coal-fired power units. In India, where coal already plays a dominant role, its use has expanded further, even substituting for cooking gas in some cases.This trend has raised concerns about "carbon lock-in," whereby new fossil <a href="https://www.atlanticcouncil.org/blogs/energysource/how-the-iran-war-could-shift-energy-policies-around-the-world/" rel="noopener noreferrer" target="_blank">fuel infrastructure</a> remains operational for decades, deepening dependency and delaying the transition to clean energy.3. Europe’s Adoption of Short-Term Measures to Mitigate Energy Costs: The current crisis has revealed a new dimension of <a href="https://energy.ec.europa.eu/news/focus-eu-energy-security-explained-2026-04-20_en" rel="noopener noreferrer" target="_blank">energy security in Europe</a>—one that extends beyond supply availability to include the ability of economies to absorb price volatility.Sharp increases in energy costs have intensified inflationary pressures and undermined industrial competitiveness, prompting governments to adopt short-term measures such as subsidies and tax reductions, often at the expense of long-term investment in energy transition.This has exposed a clear tension between immediate economic stabilization and structural transformation toward more sustainable energy systems.At the same time, some European analyses argue that the solution lies in accelerating the phase-out of fossil fuels and expanding reliance on clean energy to achieve "energy independence." However, this pathway presents its own challenges, as <a href="https://www.politico.eu/article/how-the-iran-war-set-beijing-up-for-global-clean-energy-dominance/" rel="noopener noreferrer" target="_blank">China remains</a> the dominant supplier of clean energy technologies and critical materials—producing a large share of solar panels and controlling significant portions of rare earth refining and battery supply chains.4. Gains for Energy Producers in the Western Hemisphere: The Western Hemisphere has emerged as a <a href="https://www.atlanticcouncil.org/blogs/energysource/how-the-iran-war-could-shift-energy-policies-around-the-world/" rel="noopener noreferrer" target="_blank">potential beneficiary</a> of the crisis. Supply shortages have created opportunities for producers in the United States, Canada, Brazil, and Guyana to expand market share and attract investment.However, these opportunities are unevenly distributed. Countries lacking stable regulatory environments or facing structural weaknesses in their energy sectors are less able to capitalize on global market shifts.Brazil provides a clear example. Despite its strong commitment to <a href="https://www.postguam.com/news/world/brazil-s-green-energy-industry-is-falling-victim-to-its-own-success/article_28424c93-ef85-42b7-8a14-cfaa4e49ba4f.html" rel="noopener noreferrer" target="_blank">clean energy</a>, it faces a structural bottleneck in transmission lines, limiting its ability to absorb surplus electricity from new projects and forcing grid operators to curtail production.5. Resumption of Energy Production Plans in Parts of Africa: Despite the immediate negative effects of the energy crisis in Africa—including rising fuel and fertilizer prices and worsening food security—<a href="https://businessreport.co.za/energy/2026-04-22-africas-opportunity-in-a-shifting-global-energy-and-resource-landscape/" rel="noopener noreferrer" target="_blank">new opportunities</a> have emerged for resource-rich African countries to strengthen their position in global energy markets.This shift is driven by efforts among consumer nations to diversify supply sources. However, these opportunities remain contingent on the ability of African states to attract investment and develop infrastructure, particularly in light of potential declines in external financing.Several previously stalled or delayed projects have resumed. Countries such as Namibia, Mozambique, and Tanzania have made <a href="https://businessreport.co.za/energy/2026-04-22-africas-opportunity-in-a-shifting-global-energy-and-resource-landscape/" rel="noopener noreferrer" target="_blank">progress in advancing</a> production plans, while Nigeria and Angola continue to increase oil and gas output.Meanwhile, liquefied natural gas (LNG) projects in the Rovuma Basin in East Africa are regaining momentum. Uganda is also almost ready to start exporting oil via the East African Crude Oil Pipeline to the Tanzanian coast, with <a href="https://africanenergycouncil.org/tanzania-and-uganda-aim-for-first-eacop-oil-export-by-july-2026/" rel="noopener noreferrer" target="_blank">technical operations</a> expected to begin in July 2026 and full exports anticipated by October.6. Slower Investment in Green Infrastructure Due to High Interest Rates: Repeated energy price shocks driven by geopolitical tensions have disrupted central bank interest rate strategies amid rising global inflation, posing a <a href="https://greencentralbanking.com/2026/04/17/us-war-on-iran-shows-renewable-energy-is-inflation-management-tool/" rel="noopener noreferrer" target="_blank">major challenge</a> to the energy transition.Higher interest rates are slowing investment in green infrastructure by increasing financing costs for renewable energy projects, which typically require substantial upfront capital expenditure.In response, experts have proposed that central banks establish targeted green financing mechanisms to decouple clean energy funding costs from broader interest rate fluctuations, thereby ensuring continued investment despite geopolitical instability.7. Emerging Challenges in Transporting Critical Minerals for Renewable Technologies: Supply disruptions in the Strait of Hormuz have significantly complicated the <a href="https://greencentralbanking.com/2026/04/17/us-war-on-iran-shows-renewable-energy-is-inflation-management-tool/" rel="noopener noreferrer" target="_blank">transport of essential minerals</a> required for renewable energy technologies, such as the aluminum used in solar panels. This challenge is compounded by the fact that the Middle East also plays a role in the global production of these materials.These disruptions have already contributed to reduced output in some renewable energy facilities. If they persist, such conditions could slow the pace of global clean energy capacity expansion.Expected ScenariosSeveral potential pathways may emerge in the context of the global energy transition. These can be broadly grouped into three main scenarios:1. Acceleration of the Energy Transition: This scenario is based on the assumption that energy crises can generate political momentum that facilitates the acceleration of structural reforms. Such reforms may include streamlining licensing procedures for renewable energy projects, improving energy efficiency, and supporting the shift toward electric vehicles.In addition, crises may incentivize countries to pursue greater strategic autonomy by diversifying energy sources and reducing dependence on maritime chokepoints such as the Strait of Hormuz. At the same time, increased volatility in fossil fuel prices raises the financial risks associated with investment in conventional energy, thereby strengthening the case for expanding clean energy infrastructure.The war in the Middle East has demonstrated that the <a href="https://greencentralbanking.com/2026/04/17/us-war-on-iran-shows-renewable-energy-is-inflation-management-tool/" rel="noopener noreferrer" target="_blank">green transition</a> is no longer a theoretical option, but an operational necessity. Any geopolitical shock tends to trigger sharp increases in crude oil prices, which in turn raise costs across production, transportation, and agriculture—ultimately fueling inflation across the broader economy. In this context, central banks face relative limitations, as their conventional tools are primarily designed to address demand-driven inflation rather than supply-side shocks.2. The War as an Obstacle to Sustainable Energy Transition: Under this scenario, the war undermines the conditions necessary for a sustainable energy transition. Energy crises typically push governments to prioritize short-term supply security, including increased reliance on fossil fuels or extending the operational lifespan of traditional power plants.Geopolitical uncertainty also drives up financing, insurance, and transportation costs, slowing the implementation of clean energy projects. At the same time, trade restrictions can increase the fragility of critical mineral supply chains and elevate shipping costs, creating direct barriers to achieving net-zero targets and sustainable energy transformation.3. A Transitional Impact Linked to the Duration and Intensity of the Conflict: This scenario suggests that outcomes will depend on the duration and intensity of the conflict, as well as government policies and resource security strategies. A short-term shock may stimulate reforms and accelerate investment in clean energy.Conversely, a prolonged conflict could entrench inflation and further disrupt supply chains, leading to divergent policy responses—some supporting a structural transition toward clean energy, while others prioritize the stability of fossil fuel supplies. In this context, securing critical minerals and strengthening circular economy frameworks will remain decisive factors in determining the pace of transition.Overall, the war on Iran has revealed a profound structural shift in the global energy system. The challenge is no longer confined to transitioning toward clean energy sources; it now extends to managing that transition within an evolving set of geopolitical <a href="https://www.politico.eu/article/how-the-iran-war-set-beijing-up-for-global-clean-energy-dominance/" rel="noopener noreferrer" target="_blank">dynamics</a>. The crisis has also demonstrated that diversification alone is no longer sufficient to ensure energy security. Instead, the focus is shifting toward strengthening system resilience and enhancing the capacity to absorb and adapt to prolonged shocks.In this context, the future trajectory of these transformations will depend largely on how effectively states <a href="https://www.atlanticcouncil.org/blogs/energysource/how-the-iran-war-could-shift-energy-policies-around-the-world/" rel="noopener noreferrer" target="_blank">balance</a> the immediate crisis response with long-term structural transition. While war may accelerate progress toward <a href="https://2025.cedare.org/iran-war-and-the-energy-transition-accelerator-or-anchor-on-net-zero/" rel="noopener noreferrer" target="_blank">net-zero targets</a> by reinforcing the energy security rationale for the green transition, it may simultaneously hinder that trajectory if disruptions in energy markets and supply chains persist and financing costs continue to rise.&nbsp;

Global Energy Policy in the Wake of the Iran Conflict