Iran War Energy Crisis Highlights Global Dependence on Fossil Fuels
The ongoing war in Iran has starkly exposed the world's continued reliance on fragile fossil fuel supply chains, serving as a powerful wake-up call for accelerating the transition to renewable energy sources. Fighting has effectively halted oil exports through the critical Strait of Hormuz, a narrow waterway that transports approximately one-fifth of global oil and liquefied natural gas (LNG). This disruption has sent shockwaves through energy markets, driving up prices and placing immense strain on import-dependent economies across the globe.
Asia Bears the Brunt, But Global Impact is Widespread
Asia, the primary destination for much of this oil, has been hit hardest by the supply crunch. However, Europe and Africa are also feeling significant pressure. European policymakers are scrambling to implement energy demand reduction measures, while African nations brace for escalating fuel costs and inflationary pressures. Unlike previous oil shocks, renewable power now offers a cost-competitive alternative in many regions. According to the International Renewable Energy Agency, over 90% of new renewable power projects commissioned in 2024 were cheaper than fossil-fuel alternatives.
Oil's pervasive use in industries like fertilizer and plastics production means most countries are impacted. Nations with more developed renewable infrastructure enjoy greater insulation, as these energy sources depend on domestic resources like sunlight and wind rather than imported fuels. "These crises regularly occur," noted James Bowen of ReMap Research. "They are a feature, not a bug, of a fossil fuel-based energy system."
Contrasting Approaches in China and India
China and India, the world's two most populous nations, both face the monumental challenge of powering growth for over a billion people. Both have expanded renewable energy capacity, but China has done so on a vastly larger scale, despite its continued reliance on coal. Today, China leads the world in renewable energy adoption, with the International Energy Agency reporting that about one in ten cars in China is electric.
While China remains the world's largest crude oil importer and a major buyer of Iranian oil, electrifying parts of its economy with renewables has reduced import dependency. "Without that shift, China would be far more vulnerable to supply and price shocks," said Lauri Myllyvirta of the Centre for Research on Energy and Clean Air. He added that China can also leverage reserves built during low-price periods and switch between coal and oil in industrial settings.
India has also increased clean energy use, particularly solar power, but at a slower pace with less government support for manufacturing renewable equipment and grid integration. Following Russia's invasion of Ukraine in 2022, India prioritized energy security by purchasing discounted Russian oil and boosting coal production. It also accelerated solar and wind development, which helped cushion but not entirely avoid supply disruptions, according to Duttatreya Das of Ember.
"Everyone cannot be China," Das remarked. India now faces a cooking gas shortage, driving demand for induction cooktops and threatening restaurant closures, with potential impacts on fertilizer and ceramics industries.
Wealthy Nations' Mixed Responses
The energy shock is a familiar scenario for wealthy nations in Europe and East Asia. In 2022, some European governments initially aimed to reduce fossil fuel dependence but soon pivoted to securing new fossil fuel suppliers instead, explained Pauline Heinrichs, a climate and energy researcher at King's College London.
Germany, for instance, rushed to construct LNG terminals to replace Russian gas with mostly American fuel, while broader energy transition efforts, including demand reduction, slowed. A 2023 study indicated that Europe's excess spending on fossil fuels since the Russia-Ukraine war equated to about 40% of the investment needed for a clean energy transition in its power system. "In Europe, we learned the wrong lesson," Heinrichs stated.
In Japan, policy responses to past shocks have focused on diversifying fossil fuel imports rather than investing heavily in domestic renewables, said Ayumi Fukakusa of Friends of the Earth Japan. Solar and wind constitute just 11% of Japan's energy production, similar to India but behind China's 18%, according to Ember data, though Japan's overall energy use is lower.
The Iran war dominated discussions during Japanese Prime Minister Sanae Takaichi's recent meeting with U.S. President Donald Trump, who has long urged Japan to purchase more American LNG and recently called on allies to assist in securing the Strait of Hormuz. Conversely, South Korean President Lee Jae-myung suggested the crisis could present "a good opportunity" to accelerate the shift to renewable energy.
Poorer Nations Face Greatest Vulnerability
Poorer countries in Asia and Africa are particularly exposed, competing with wealthier nations and large buyers like India and China for limited gas supplies, which drives prices higher. Import-dependent economies such as Benin, Zambia, Bangladesh, and Thailand could experience some of the most severe shocks.
Costly fuel increases transportation and food expenses, and many of these countries possess limited foreign-exchange reserves, restricting their ability to afford imports if prices remain elevated. Africa's vulnerability is pronounced due to widespread reliance on imported oil for transport and supply chains.
Investing in cleaner energy for long-term security makes strategic sense for African nations, said Kennedy Mbeva of the University of Cambridge's Centre for the Study of Existential Risk. However, not all are choosing renewables; South Africa is considering building an LNG import terminal and new gas-fired power plants. Others, like Ethiopia—which banned gasoline and diesel cars in 2024 to promote electric vehicles—are doubling down on renewable investments.
The real challenge is not merely weathering the next shock but ensuring it does not "derail the country’s development trajectory," emphasized Hanan Hassen, an analyst at Ethiopia's Institute of Foreign Affairs.
Renewables Offer a Buffer for Some Nations
Increased renewable energy adoption has provided a cushion for certain Asian countries against the energy shock. Pakistan's solar boom has prevented over $12 billion in fossil fuel imports since 2020 and could save an additional $6.3 billion in 2026 at current prices, according to Renewables First and the Centre for Research on Energy and Clean Air.
Vietnam's existing solar generation is projected to save the country hundreds of millions of dollars in potential coal and gas imports in the coming year, based on current high prices, as per Zero Carbon Analytics. Other nations are implementing stringent measures to manage tight supplies.
Bangladesh has closed universities to conserve electricity and, due to limited storage capacity, began rationing fuel after panic buying at filling stations, explained economist Khondaker Golam Moazzem. Thailand has suspended petroleum exports, increased gas production, and started drawing on reserves.
If the conflict persists into April, Thailand's finite reserves and limited subsidy budget could lead to sharply higher prices, warned Areeporn Asawinpongphan of the Thailand Development Research Institute. "The time for promoting domestic renewables should have happened a long time ago," Asawinpongphan concluded.
