Unseen Costs of Conflict: How the U.S.-Israel War Could Redefine Global Energy Dynamics

The Ripple Effects of War on Global Energy

In the second week of the US-Israeli war against Iran, energy markets are already in turmoil. The price of Brent Crude Oil recently soared past $100 per barrel, not far from its Monday peak of $119. But what does this really mean for the world?

While these price changes dominate headlines, they distract us from the broader, more perilous implications of this conflict. The strait of Hormuz, a crucial maritime chokepoint, carries about one-fifth of the world's oil and liquefied natural gas. Disruptions here will cascade through households globally, greatly impacting everyday life.

The Shift in Energy Power

To fully grasp the ongoing crisis, we must consider the fundamental shifts that have redrawn the energy map over the last two decades. One unexpected consequence of this war is the unification of the U.S.'s most significant adversaries—China and Russia.

“China consumes around 90% of Iran's crude exports, mostly to fuel its rapidly growing economy. The conflict poses an existential risk to its energy supplies.”

The oil trade has dramatically pivoted east; China now consumes approximately one-quarter of global oil imports, with a lion's share routed from the Gulf states. These developments compel us to rethink our understanding of energy security and geopolitical alliances.

Potential Isolation of the Gulf

As economic power shifts, the Gulf region's role as a reliable supplier of oil is at risk. Energy analyst Adam Hanieh points to the pivotal shift from the West to Asia in oil imports, marking a potential isolation for Gulf nations if conflict escalates. This instigates a dangerous reliance on alternative suppliers, heightening geopolitical tensions.

The fallout will also reverberate through economies, particularly those in the Global South that depend on increasingly expensive fuel imports. With soaring energy costs likely to increase transport and food prices, low-income households will bear the brunt.

The Fertilizer Crisis

Rising oil prices have far-reaching implications for global agriculture, directly affecting the supply of crucial fertilizers. The Gulf plays an essential role in producing urea, a widely-used nitrogen fertilizer imperative for global crop production. As shipments from this region falter, farmers could face skyrocketing costs during peak planting season, leading to a potential food crisis.

“History shows that such shocks rarely affect everyone equally; the poorest communities often face the harshest consequences.”

The Need for Energy Transition

The current crisis underscores a crucial truth: our global economy remains heavily reliant on fossil fuels. While there's been increasing discourse about transitioning to renewable energy sources, recent events serve as a stark reminder of how entrenched oil and gas are in our systems.

As the world grapples with these dangers, the need for a radical shift away from fossil fuels is more pressing than ever. The longer we delay this transition, the more susceptible we become to the volatility of oil prices, geopolitical conflicts, and the cascading effects on global food security.

• Adam Hanieh serves as the director of the Soas Middle East Institute, examining critical intersections between energy politics and social equity.