Executive summary
The US–Israel–Iran war is already creating the largest oil supply disruption in history by severely constraining traffic through the Strait of Hormuz, driving up prices and energy-security risks worldwide. In the short term this shock is likely to slow decarbonisation by prompting emergency fossil fuel measures, but over the medium to long term it could also accelerate the shift to renewables, efficiency and electrification as governments seek to reduce exposure to volatile Middle Eastern hydrocarbons, echoing the impacts of the 1970s oil crises and Russia’s war in Ukraine.
The net effect on the clean energy transition will depend on how long the war lasts, how severe the disruption to oil and gas flows becomes, and how policy-makers balance energy security, affordability and climate goals.
1. Context: the 2026 US–Israel–Iran war and energy markets
1.1 Nature of the conflict and disruption channels
In late February 2026 the United States and Israel launched large-scale airstrikes on Iran, targeting political leaders, military assets and energy infrastructure, and prompting Iranian retaliation across the region. Iran has responded in part by closing or severely constraining traffic through the Strait of Hormuz, a chokepoint that normally carries around one-fifth of global oil consumption and a major share of liquefied natural gas (LNG) exports.
The International Energy Agency (IEA) and other analysts describe the resulting supply shock as the largest disruption in the history of the global oil market, with oil and products flows through Hormuz falling from roughly 20 million barrels per day to a “trickle” and Gulf producers cutting output by at least 10 million barrels per day. Global oil supply is projected to drop by around 8 million barrels per day in March alone, roughly 8 percent of demand, while LNG and refined product markets are also severely affected.
IEA Chief Fatih Birol has called the war “the most significant threat to global energy security ever”, and the agency has coordinated the release of 400 million barrels from emergency reserves to dampen price spikes. Brent crude has already breached 100 dollars per barrel at times and remains highly volatile, reinforcing inflationary pressures and macroeconomic uncertainty.
1.2 Lessons from past energy crises
Historically, severe fossil fuel supply shocks have often triggered structural energy policy shifts rather than a simple reversion to the status quo.
- The 1973 and 1979 oil crises, also linked to Middle Eastern conflicts, prompted governments in the US, Europe and Japan to prioritise energy conservation, fuel efficiency and diversification, including major investments in nuclear power and early renewable energy research.
- Russia’s 2022 invasion of Ukraine produced the first truly global energy crisis of the modern era, which the IEA argues is “turbo-charging” renewables and likely to bring forward the peak in global fossil fuel use to around the mid‑2020s.
These precedents suggest that while crises often produce short-term backsliding (for example temporary increases in coal use), they can also catalyse long-term acceleration of the clean energy transition when governments link energy security and climate policy.[18][19][16]
2. Short‑term impacts (0–2 years): crisis response and immediate risks
2.1 Higher fossil fuel prices, inflation and energy poverty
In the short term, the dominant impact of the war is sharply higher and more volatile prices for oil, gas and some refined products.
- Oil supply losses of several million barrels per day and near-cessation of Hormuz shipping have already driven Brent crude back above 100 dollars at points, with analysts warning of sustained high prices if exports do not resume.[3][4][9][10]
- Disruptions to LNG exports from Qatar and other Gulf producers are tightening global gas markets, intensifying competition between Asian and European buyers and pushing up gas and electricity prices.[4][9]
These price spikes risk reinforcing inflation, forcing central banks to keep interest rates higher for longer, which can dampen overall investment—including in clean energy—and increase political resistance to carbon pricing or new climate-related costs on households. For low-income households and vulnerable countries, higher energy bills may push more people into energy poverty and strengthen arguments for subsidising fossil fuels, at least temporarily, which the IEA has previously warned is a “roadblock to a more sustainable future”.
2.2 Short‑term fallback to fossil fuels and emergency measures
Governments typically respond to acute energy crises by maximising near-term supply from all available sources, even if this conflicts with climate goals.
Likely short-term responses include:
- Increased output from non‑Middle Eastern producers, including US shale, North Sea fields and other non‑OPEC+ countries, as already signalled in IEA oil market reports.
- Large-scale releases of strategic oil stocks, as already announced by IEA member states, to smooth price spikes but not fundamentally change the reliance on oil.
- Temporary extensions or reactivation of coal and oil‑fired power plants in import‑dependent regions (as seen in Europe after the Ukraine invasion), in order to conserve gas and stabilise electricity supply.
- Political pressure to delay or dilute regulations that could raise short‑term energy prices, such as carbon taxes, internal combustion engine phase‑out dates, or methane regulations.
Such emergency measures can slow near‑term emissions reductions, especially if they involve locking in new fossil infrastructure with long lifetimes. However, the IEA’s experience from the Ukraine crisis suggests many governments also adopt demand‑side measures (such as energy savings campaigns) and fast‑track permitting for renewables in parallel.
2.3 Physical and cyber‑security risks to energy infrastructure
The war is also increasing the perceived and actual risk of direct attacks on energy infrastructure.
Israeli strikes on Iran’s South Pars gas field and retaliatory Iranian attacks on Qatar’s LNG facilities demonstrate that major oil and gas assets are now explicit targets in the conflict. Iran has threatened to keep Hormuz closed and strike critical infrastructure such as desalination and power plants in Gulf states, raising fears of wider disruption to both fossil and electricity systems.
In the short term this may discourage investment in new energy assets in the region—including utility‑scale solar and wind, grids and interconnectors—until the security situation stabilises. It also raises cyber‑security concerns for electricity and gas networks elsewhere, as Iran and its allies possess significant offensive cyber capabilities.
2.4 Implications for corporate decarbonisation
For corporates, higher and more volatile energy prices will sharpen the business case for energy efficiency and on‑site renewables, but may also squeeze capital budgets, especially in energy‑intensive sectors.
Companies with net‑zero targets and science‑based transition plans are likely to face pressure to show how their strategies are robust under scenarios where Middle Eastern fossil fuel supply remains constrained, including in TCFD‑ and ISSB‑aligned disclosures. At the same time, some firms may lobby for slower implementation of carbon pricing or regulatory measures during the crisis, particularly in hard‑pressed industries and regions.
3. Medium‑term impacts (2–10 years): structural shifts and policy choices
3.1 Energy security as a driver of electrification and renewables
If elevated fossil fuel prices and perceived geopolitical risks persist for several years, energy security considerations are likely to reinforce, rather than undermine, the economic case for clean energy.
The IEEFA notes that the current Middle East crisis could push the energy transition in two directions at once: short‑term crisis responses that favour fossil fuels, but stronger incentives over time to invest in domestic renewables, electrification and demand reduction as a strategic hedge against commodity volatility. The IEA’s analysis of the Ukraine‑induced energy crisis concluded that high gas and coal prices were responsible for most of the increase in electricity prices and that the response is driving record additions of wind and solar, with global renewables capacity expected to grow by 2,400 gigawatts between 2022 and 2027.
A similar dynamic could play out in response to the US–Israel–Iran war:
- Import‑dependent regions (EU, UK, Japan, India) may accelerate investment in wind, solar, grids and storage, and in electrification of transport and heat, to reduce exposure to oil and gas imports via the Gulf.
- Major economies could strengthen industrial policies to build domestic clean‑energy manufacturing (for example batteries, heat pumps, electrolysers), both to capture growth sectors and mitigate supply‑chain risks.
- Oil‑importing emerging economies may seek concessional finance and technology partnerships to leapfrog directly to renewables and efficiency, as seen in Just Energy Transition Partnerships following the Ukraine crisis.
3.2 Fossil fuel lock‑in versus managed decline
At the same time, high prices create powerful incentives for further investment in fossil fuel extraction and infrastructure outside the conflict zone.
In its response to the Ukraine crisis, the IEA emphasised that short‑lead‑time fossil projects might be needed temporarily but warned that large new long‑lived oil and gas developments would be incompatible with limiting warming to 1.5 degrees if they extend fossil dependence. If governments respond to the Iran war by approving new pipelines, LNG export terminals and upstream projects with lifetimes of several decades, this could lock in emissions and displace investment from clean alternatives.
The balance between these pathways will be shaped by policy signals:
- Stronger clean‑energy targets, carbon pricing and coal phase‑out commitments can steer investment towards renewables even in an environment of high oil and gas prices.
- Conversely, increased fossil fuel subsidies, long‑term offtake guarantees and weakened climate policies could encourage a new wave of fossil expansion that undermines Paris‑aligned trajectories.
3.3 Gas as a “transition fuel” under pressure
The war also complicates the notion of natural gas as a relatively secure and low‑carbon “transition fuel”.
The Ukraine crisis had already exposed the security risks of relying on imported gas, leading the IEA to question whether new gas infrastructure is compatible with net‑zero scenarios and to predict that fossil fuel demand will peak before 2030. Now, direct attacks on Iranian and Qatari gas assets and the disruption of LNG flows through Hormuz underline that gas supplies are vulnerable to geopolitical shocks, not just pipeline politics.
Over the medium term this may strengthen the case for:
- Accelerating electrification and direct use of renewables instead of gas in power, heating and industry.
- Prioritising energy storage, demand response and grid flexibility to manage variable renewables.
- Restricting new gas investments to projects that are clearly compatible with declining demand and can be repurposed (for example for green hydrogen) or retired early.
3.4 Nuclear power, proliferation and public acceptance
Some governments may respond to the crisis by revisiting nuclear power as a low‑carbon, domestically controlled source of baseload or firm capacity, echoing the post‑1970s energy strategies of France and others. However, an active war involving Iran’s nuclear facilities and rhetoric about potential large‑scale destruction could heighten public sensitivity to nuclear risks and proliferation.
In countries where nuclear enjoys political and social support, the crisis may reinforce arguments for lifetime extensions and new builds as part of a diversified low‑carbon mix. Elsewhere it may increase resistance, pushing policy makers to rely more heavily on renewables, efficiency and storage for decarbonisation.
3.5 Geopolitics of critical minerals and clean‑tech supply chains
While the war is centred on hydrocarbons rather than critical minerals, its broader geopolitical effects will influence clean‑energy supply chains.
- Heightened US–Iran tensions and a more fractured international order may encourage further “friend‑shoring” of clean‑energy manufacturing and critical minerals processing to trusted partners, building on trends already underway after the pandemic and the Ukraine war.
- Middle Eastern states pursuing diversification strategies may seek to use renewable energy and green hydrogen projects to maintain their role in global energy markets, but conflict risks and higher financing costs could slow some of these plans.
Overall, the medium‑term picture is one of competing forces: crisis‑driven fossil investment versus structurally stronger incentives for efficiency and clean energy as tools of energy security.
4. Long‑term impacts (10+ years): potential inflection point for the transition
4.1 Earlier peak in global fossil fuel demand
The IEA’s World Energy Outlook 2022 already projected that, under stated policies, global demand for coal, oil and gas would all peak within about a decade, largely because the Ukraine‑driven energy crisis spurred faster deployment of renewables and efficiency. If the Iran war leads to a prolonged reassessment of the risks associated with Middle Eastern oil and gas, this could further pull forward the timing of peak fossil fuel demand.
Prolonged high prices and risk premia on Middle Eastern exports would accelerate the relative cost advantage of wind, solar and storage whose costs have fallen dramatically over the past decade. Historical experience from the 1970s suggests that countries which respond to such shocks with structural shifts—improving efficiency, diversifying energy mixes, and investing in domestic alternatives—can secure long‑term economic and security benefits.
4.2 Redefining energy security concepts
The 1970s oil crises led directly to the creation of the IEA, strategic petroleum reserves and other institutions that still underpin energy security thinking. Russia’s war in Ukraine has already expanded the concept of energy security to emphasise not just supply adequacy but also resilience, affordability and compatibility with climate goals.
The US–Israel–Iran war is likely to reinforce a paradigm in which:
- Over‑dependence on any single region or supplier—particularly in geopolitically volatile areas such as the Gulf—is seen as an unacceptable risk.
- Energy systems designed around domestic renewables, flexible demand, storage and diversified interconnections are valued for their resilience as well as their emissions profile.
- Strategic reserves may increasingly include not only oil but also critical minerals, grid components and potentially even manufactured clean‑energy equipment.
This reconceptualisation strengthens the long‑term alignment between climate policy and national security, bolstering the case for sustained investment in clean energy even once the immediate crisis fades.
4.3 Shifts in Middle Eastern and Iranian energy roles
Over the long term, the war may accelerate an existing trend in which the Middle East’s centrality to global energy gradually diminishes as oil demand peaks and declines and as other regions build out renewables and alternative fuels.
Some Gulf states have already invested heavily in large‑scale solar, wind and green hydrogen projects to diversify their economies and maintain a role as energy exporters in a decarbonising world. However, the damage to regional infrastructure, increased risk premia and potential political instability stemming from the war could raise the cost of capital and slow these transitions, especially in more fragile states.
For Iran specifically, destruction of oil and gas infrastructure and deepened international isolation could either entrench a high‑risk, carbon‑intensive trajectory or, in a more optimistic scenario, create conditions for a future government to pivot towards domestic renewables and efficiency once sanctions and conflict ease. Which outcome prevails will depend heavily on domestic politics and international diplomacy.
4.4 Climate diplomacy, finance and global equity
Prolonged conflict also has indirect implications for climate governance and climate finance.
- Heightened geopolitical tensions can undermine multilateral cooperation in fora such as the UNFCCC, G20 and IMF, making it harder to agree and implement ambitious collective climate commitments.
- Higher defence spending and reconstruction costs may crowd out some public investment in climate mitigation and adaptation, particularly in donor countries.
- Developing countries already struggling with debt, climate impacts and high energy costs may find it harder to mobilise capital for clean energy, exacerbating inequities unless concessional finance and support are scaled up.
If, however, major economies frame their response to the Iran war explicitly as an opportunity to accelerate just and inclusive energy transitions—much as the EU has attempted with its REPowerEU strategy in response to Russia—then the conflict could ultimately contribute to more resilient, low‑carbon energy systems worldwide.
5. Key uncertainties and scenario considerations
5.1 Duration and intensity of the conflict
The scale and persistence of impacts on the clean energy transition will hinge on whether the war is relatively short‑lived or evolves into a prolonged, region‑wide confrontation.
A rapid ceasefire and reopening of Hormuz would likely limit the duration of extreme price spikes, reducing the risk of deep global recession and curbing the incentive for long‑lived fossil investments, while still leaving a legacy of heightened awareness about energy security risks. A drawn‑out conflict with repeated attacks on energy infrastructure and recurrent shipping disruptions would increase the probability of both accelerated investment in clean energy and problematic lock‑in of new fossil projects.
5.2 Policy responses: green acceleration vs fossil rollback
Policy choices over the next few years are critical.
- A “green acceleration” scenario would see governments use the crisis to justify faster deployment of renewables, grids and electrification, backed by strong efficiency programmes and targeted social support to protect vulnerable households from high prices, avoiding large new fossil infrastructure.
- A “fossil rollback” scenario would prioritise maximising fossil supply, extending fossil subsidies and delaying climate policies, risking both higher long‑term emissions and continued vulnerability to future shocks.
Real‑world outcomes are likely to mix elements of both, varying by region and over time.
5.3 Technology costs and innovation
Finally, the trajectory of clean‑energy technology costs and innovation will shape how effectively the world can use the crisis as a springboard for transition.
Renewables, storage and electric vehicles have seen dramatic cost declines over the past decade, making them increasingly competitive even without high fossil prices. Continued advances—including in long‑duration storage, flexible demand management, green hydrogen and low‑carbon industrial processes—would strengthen the economic case for aligning energy security and decarbonisation in the wake of the Iran war.
Conversely, if supply‑chain constraints, trade tensions or financial stress slow clean‑tech deployment, the risk increases that high fossil prices lead mainly to economic hardship and political backlash rather than accelerated transition.
6. Overall assessment
In summary, the US–Israel–Iran war and the associated Middle East energy shock pose serious near‑term risks to the clean energy transition by driving up fossil fuel prices, straining economies and encouraging emergency reliance on existing fossil infrastructure. Yet historical experience from the 1970s and from Russia’s war in Ukraine shows that such crises can also become inflection points that ultimately speed the shift towards more efficient, electrified and renewable energy systems.
Whether the current conflict ends up slowing or accelerating decarbonisation in net terms will depend on the duration and intensity of the war, how governments respond in terms of both fossil and clean‑energy investment, and the extent to which energy security is redefined to align with climate objectives. Strategic choices in the next few years will be pivotal for determining the long‑term trajectory of the global clean energy transition.
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