The Energy Shock and the Fractured Future, How the Iran War Is Reshaping Global Power

The Energy Shock and the Fractured Future, How the Iran War Is Reshaping Global Power

The disastrous war being waged against Iran by the United States and Israel has disrupted energy supply across the world. Governments in both rich and poor countries are warning their people of dire times ahead—acute energy scarcity, rationing, and the prospect of cars and planes running out of fuel. The closure of the Strait of Hormuz has choked off some 20 per cent of global oil and gas flows. Prices have skyrocketed. Long queues at fuel stations are becoming common again, driving up costs that people can barely afford. In most countries, particularly in the developing world, fuel imports are the single largest charge on trade deficits, and rising oil prices have crippling effects on economies. There is also the impending shortfall in global fertiliser supply, which is expected to hit farmers hard—people who are already reeling from extreme weather driven by climate change and distorted global food prices. The world is on its knees—not by choice, but because of its pusillanimous and pathetic response to this senseless war. The rules-based order and all its morality lie in tatters. The question then is: What will the future energy map look like? The answer is not straightforward. The current crisis could push countries backwards, towards more polluting domestic resources like coal and charcoal. But it could also accelerate the transition away from fossil fuels, as imported solar panels and batteries become the cheaper, faster, and more reliable path to energy security. The drivers of the future energy map will be cost, national manufacturing capability, and supply chain resilience. And this time, the rationale for the clean-energy transition will be rooted not in climate altruism but in hard-nosed national security.

The Immediate Catastrophe: Energy Scarcity, Fertiliser Shortages, and Economic Pain

Let us not make light of the assassinations, the thousands of lives lost, and the senseless destruction that we witness so clearly as we scroll on our screens. Let us also not make light of the real pain that this energy disruption has brought to our world. Many countries are facing shortages of cooking fuel, including liquefied petroleum gas (LPG). Households are spending vast portions of their income to procure it at any cost. In India, petrol has crossed ₹103 per litre, LPG is at ₹912 per cylinder, and the government has been forced to hike export duties on diesel and ATF to ensure domestic supply. In Europe, gas prices have sharply risen since late February, and concern is spreading to refined fuels such as diesel and jet fuel. In Africa, millions who rely on imported refined products are facing an impossible choice: pay exorbitant prices or go without.

The crisis extends beyond fuel. Fertilisers, particularly nitrogen-based ones, are energy-intensive to produce. Natural gas is the primary feedstock for ammonia, which is the building block of most nitrogen fertilisers. With gas prices soaring and supply disrupted, fertiliser production has been cut back globally. Farmers—already reeling from extreme weather driven by climate change and distorted global food prices—are facing a new shock. Lower fertiliser application means lower crop yields, which means higher food prices and increased hunger. The war in West Asia is not just an energy war; it is a food war.

The Pre-War Trajectory: A World in Transition

Even before this unseemly war, the world was in the midst of an energy transition—steadily replacing coal with renewables for electricity, and displacing the use of petrol and diesel in vehicles. According to the International Renewable Energy Agency’s (IRENA) March 2026 report, by the end of 2025, renewables accounted for close to 50 per cent of the world’s installed electricity generation capacity. An impressive 85 per cent of new power additions that year were renewables, mainly solar and wind. The costs of solar panels, wind turbines, and batteries had fallen dramatically over the previous decade, making renewables the cheapest source of new electricity generation in most of the world.

What is interesting is that this energy transition was not only happening where one might expect, like China or Europe, but also in developing and emerging economies. A recent report by think tank Ember, in partnership with a coalition of 74 of the world’s most climate-vulnerable countries, found that these nations were fast-tracking electrotechnology—not primarily due to climate change concerns, but because it was faster, cheaper, and more reliable than building out fossil fuel infrastructure. For low- and middle-income economies that are fuel importers, the energy crisis is real: over 700 million people still lack reliable energy for basic needs. But they are also not yet locked into fossil fuel systems. They can bypass the dirty, expensive, and geopolitically volatile path that rich countries took and leapfrog directly to renewables.

The Ember report documented remarkable progress. Namibia and Togo lead in solar generation. Jordan and Kyrgyzstan lead in battery sales. And most strikingly, Nepal and Sri Lanka lead in electric vehicle (EV) uptake, with close to 70 per cent of new vehicles being electric. These are not rich countries. They are not tech hubs. They are nations that saw the economic logic of renewables and acted on it. The costs of solar panels and batteries and EVs have become affordable, and importing from China—the world’s dominant manufacturer of these technologies—is feasible for them. This is the pre-war context that the current crisis has shattered.

The Two Divergent Futures: Backward or Forward?

The current disruption has raised the cost of energy imports and made countries acutely aware of the need for energy security. The closure of the Strait of Hormuz has disrupted some 20 per cent of global oil and gas flows, but even if it opens, damages to production facilities in the region will take time to repair. This could well mean that the era of cheap and abundant fossil fuels is over. The world is now facing a choice between two divergent futures.

Future One: The Fossil Fuel Backslide. In response to the crisis, countries could turn inward, utilising more of their own domestic resources—from coal to charcoal—both of which are highly polluting. Coal-fired power plants that were scheduled for retirement could be kept online. Deforestation for charcoal production could accelerate. Oil and gas exploration in environmentally sensitive areas could be ramped up. This would be a disaster for the climate, locking in emissions for decades and making it impossible to meet the goals of the Paris Agreement. It would also perpetuate the very vulnerabilities that caused the crisis: dependence on imported fuels, exposure to price volatility, and vulnerability to geopolitical shocks. But for countries with domestic coal reserves, like India, Indonesia, and South Africa, the temptation will be strong.

Future Two: The Renewables Acceleration. Alternatively, the crisis could spur the transition away from fossil fuels. Imported solar panels and batteries are now available and affordable. The cost of renewable electricity is already lower than fossil-fuel-generated electricity in most of the world. And the security argument for renewables is becoming compelling. A solar panel on a rooftop does not come from the Strait of Hormuz. A battery storage system does not require a pipeline from a war zone. An EV charged from domestic renewable sources is not subject to global oil price spikes. For countries that are net importers of fossil fuels, the national security case for renewables is now as strong as the climate case.

The drivers of this choice will be threefold. First, cost: renewables are already cheaper; the question is whether the upfront capital costs can be financed. Second, national manufacturing capability: countries that can manufacture solar panels, batteries, and EVs domestically will have a strategic advantage. China currently dominates this space, but India, the US, and Europe are investing heavily in domestic supply chains. Third, supply chain resilience: the current crisis has shown the dangers of dependence on a single chokepoint (the Strait of Hormuz) and on a single supplier (Russia for gas, China for renewables). Countries will seek to diversify their supply chains, even if it means paying a premium.

The New Scramble: Oil and Gas from Nigeria, Guyana, Russia, and the US

Even as the long-term transition unfolds, the immediate crisis has triggered a new scramble for oil and gas sources. Nigeria, with its vast but underutilised reserves, is ramping up production. Guyana, a new oil producer that has emerged as a significant player in the last decade, is attracting intense interest. Russia, despite sanctions, remains a major supplier, and some countries are quietly increasing imports. And the United States, now the world’s largest oil producer, is expanding its exports. The geopolitics of energy are being redrawn. The US, which was a net importer of oil two decades ago, is now a major exporter, giving it leverage over allies and adversaries alike. China, the world’s largest importer, is acutely vulnerable to any disruption in the Strait of Hormuz and is therefore accelerating its own energy transition and its diplomatic engagement with Iran, Saudi Arabia, and other Gulf producers.

For India, the new scramble presents both opportunities and challenges. India has traditionally sourced most of its oil from the Gulf, but it is now diversifying. It has increased imports from Russia (discounted due to sanctions), from the US, and from Guyana. It is also investing in domestic renewable energy at a remarkable pace, aiming for 500 GW of non-fossil fuel capacity by 2030. The current crisis has made energy security a top national priority, and India is responding with a combination of diplomatic diversification and domestic transition.

The Central Role of Clean Energy: Security, Not Just Climate

In all this, sources of clean energy and more efficient use of existing supplies can and must play a central role. But this time, the rationale for the clean-energy transition would be rooted in national energy security, with the possibility to achieve the co-benefit of climate mitigation. This is a crucial shift. For years, the climate argument for renewables was powerful but abstract. The benefits of emissions reduction are global and long-term. The costs of transition are local and immediate. The energy security argument is different. The benefits are local and immediate: lower import bills, reduced vulnerability to price spikes, and insulation from geopolitical blackmail. This argument resonates with finance ministers and national security advisers, not just environment ministers.

The International Renewable Energy Agency’s March 2026 report documented that renewables already account for close to 50 per cent of global installed electricity generation capacity. The Ember report showed that developing countries are leapfrogging to electrotechnology not for climate reasons but for economic and reliability reasons. The current energy shock will accelerate this trend. Countries that were already moving towards renewables will move faster. Countries that were hesitating will reconsider. The cost of solar panels and batteries has fallen so dramatically that the economic case is now overwhelming. The security case is now compelling. The only missing ingredient is political will.

A Sad Acknowledgment: The World Is Broken

As I write this, I must acknowledge, with much sadness, that the future is not going to be easy. The current time tells me that we, as a global society, have regressed. The rules-based order, painstakingly built over seven decades, lies in tatters. The United Nations Security Council is paralysed. International law is ignored. Human rights are trampled. The climate crisis, the greatest long-term threat humanity has ever faced, is being deprioritised in the face of immediate security concerns. It is going to be hard to pick up the pieces from these ruins of human depredation and depravity. We will find it hard to solve global problems like climate change in a world that is so abjectly broken and divided.

Yet, even in this bleak landscape, there are grounds for a certain kind of hope. The energy transition is not being driven by international cooperation or altruism. It is being driven by self-interest: the desire for cheaper electricity, the need for energy security, the imperative of economic competitiveness. That self-interest is now aligned with the long-term interests of the planet. The current crisis, for all its horror, may be the shock that finally breaks the world’s addiction to fossil fuels. The future energy map will be shaped by cost, capability, and security. And on all three dimensions, renewables are winning.

Conclusion: The Future Energy Map

The closure of the Strait of Hormuz has disrupted 20 per cent of global oil and gas flows. Even if it reopens, the era of cheap and abundant fossil fuels is over. The cost of energy is the cost of economic growth, and the changed scenario will mean reworking plans for energy security. The drivers will be cost; national manufacturing capability for green technologies, including solar and electric vehicles; and what is better for energy security-related supply chains. In all this, sources of clean energy and more efficient use of existing supplies can and must play a central role. The rationale for the clean-energy transition will be rooted in national energy security, with the possibility to achieve the co-benefit of climate mitigation.

The world is on its knees. But it is not helpless. The choice between a fossil fuel backslide and a renewables acceleration is still open. The future energy map will be drawn not by the war in West Asia alone, but by the decisions that governments make in its aftermath. Let us hope they choose wisely.

Q&A: The Energy Shock and the Future of Global Power

Q1: What is the immediate impact of the Iran war on global energy supplies, and why is it affecting fertilisers and food?

A1: The closure of the Strait of Hormuz has choked off approximately 20 per cent of global oil and gas flows. Oil prices have surged from pre-war levels of $64 to $90-100, with a 52-week high of $119.48. This has led to fuel shortages, long queues at petrol stations, and soaring prices for cooking gas (LPG). The impact extends beyond fuel because fertilisers, particularly nitrogen-based ones, are energy-intensive to produce. Natural gas is the primary feedstock for ammonia, which is the building block of most nitrogen fertilisers. With gas prices soaring and supply disrupted, fertiliser production has been cut back globally. Lower fertiliser application means lower crop yields, which means higher food prices and increased hunger. The war in West Asia is therefore not just an energy war; it is a food war.

Q2: What was the state of the global energy transition before the war, according to IRENA and Ember reports?

A2: According to IRENA’s March 2026 report, by the end of 2025, renewables accounted for close to 50 per cent of the world’s installed electricity generation capacity, and 85 per cent of new power additions that year were renewables (mainly solar and wind). The Ember report, in partnership with 74 climate-vulnerable countries, found that developing economies were fast-tracking electrotechnology not primarily for climate reasons but because it was faster, cheaper, and more reliable than fossil fuels. Examples include: Namibia and Togo leading in solar generation; Jordan and Kyrgyzstan leading in battery sales; and Nepal and Sri Lanka leading in EV uptake (close to 70 per cent of new vehicles electric). Over 700 million people still lack reliable energy access, but they can bypass fossil fuels and leapfrog directly to renewables.

Q3: What are the two divergent futures for the global energy map that the article outlines?

A3:

• Future One (Fossil Fuel Backslide): Countries turn inward, utilising more of their own domestic resources—coal, charcoal, domestic oil and gas—despite high pollution. This would be a disaster for the climate, lock in emissions for decades, and perpetuate vulnerabilities to price volatility and geopolitical shocks. Temptation is strong for countries with domestic coal reserves (India, Indonesia, South Africa).

• Future Two (Renewables Acceleration): The crisis spurs the transition away from fossil fuels. Solar panels and batteries are already cheaper and available. The security argument becomes compelling: a solar panel on a rooftop does not come from the Strait of Hormuz. EVs charged from domestic renewables are not subject to global oil price spikes. For net importers, the national security case for renewables is now as strong as the climate case.
  The drivers of this choice will be cost, national manufacturing capability, and supply chain resilience.

Q4: What is the “new scramble” for oil and gas, and how is it reshaping geopolitics?

A4: The crisis has triggered a scramble for alternative oil and gas sources:

• Nigeria is ramping up production from its vast but underutilised reserves.

• Guyana (a new oil producer) is attracting intense interest.

• Russia remains a major supplier despite sanctions; some countries are quietly increasing imports.

• The United States, now the world’s largest oil producer, is expanding exports, giving it leverage over allies and adversaries alike.

• China, the world’s largest importer, is acutely vulnerable to Hormuz disruption and is accelerating its own energy transition and diplomatic engagement with Gulf producers.
  For India, the scramble presents opportunities to diversify from traditional Gulf sources, including increased imports from Russia (discounted), the US, and Guyana, while simultaneously investing in domestic renewables.

Q5: Why does the article argue that the rationale for clean energy will shift from “climate” to “security,” and why is this significant?

A5: The article argues that for years, the climate argument for renewables was powerful but abstract: the benefits of emissions reduction are global and long-term, while the costs of transition are local and immediate. The energy security argument is different: the benefits are local and immediate—lower import bills, reduced vulnerability to price spikes, insulation from geopolitical blackmail (like the closure of the Strait of Hormuz). This argument resonates with finance ministers and national security advisers, not just environment ministers. The current crisis has made energy security a top national priority. The shift is significant because it aligns self-interest (cheaper electricity, security) with the long-term interests of the planet (emissions reduction). The energy transition will now be driven not by international cooperation or altruism, but by hard-nosed national security calculus. The article concludes that the world is broken and divided, but the energy transition may be accelerated by the very forces that are breaking it. The future energy map will be shaped by cost, capability, and security—and on all three dimensions, renewables are winning.