Impact of Middle East Crisis on Global Energy Markets

How could the crisis affect the energy transition? 

• The crisis could push the energy transition in two directions at once.
• On one hand, renewables are increasingly seen as providing energy security while insulating consumers from price shocks. The Philippines is racing ahead with solar deployments, India is accelerating permitting for wind and batteries, and stock prices are soaring for Chinese solar and battery companies. Meanwhile, LNG executives warn that volatility is bad for business, with Vietnam and New Zealand already rethinking LNG import projects.
• On the other hand, many short-term responses favor fossil fuels, including subsidies, restarts of coal power plants, and efforts to secure new oil and gas supplies outside the Persian Gulf. At the same time, economic jitters, rising borrowing costs, fiscal challenges and disrupted supply chains may slow clean energy deployments.
• Much will depend on the evolving viewpoints of decision-makers, investors, and the public. Will they see renewables as an antidote to energy security and affordability woes? Or will they double down on fossil fuels?   

Sources & Resources: New York Times on solar; Chemnet on China; Reuters on Vietnam; Reuters on India; New Zealand Herald; IEEFA slideshow; IEA’s 2026 Energy Crisis Policy Response Tracker. 

What commodity markets could be affected by disruption in the Persian Gulf? 

• Commodity shocks could go far beyond oil and gas.
• The Strait of Hormuz accounts for one-third of global seaborne trade in fertilizer and 7–8% of global fertilizer supply.
• About 40% of the world’s helium, which is critical to computer chip manufacturing, comes from the Persian Gulf. The region accounts for about 15% of global polyethylene capacity, 9% of polypropylene capacity, and about 9% of the world’s aluminum.  

Sources & Resources: UN Trade & Development. 

How long could it take to repair damaged Middle East energy infrastructure? 

• Damage has affected more than 40 major energy infrastructure assets. Even if attacks stop today, “normal” is years away. 
• Restoring Qatar’s Ras Laffan LNG facility could take 3–5 years. The secret’s out: global fossil fuel infrastructure is fragile.   

Sources & Resources: Energy Mix; IEEFA in New York Times. 

How vulnerable is Asia in this energy crisis? 

• As IEA Executive Director Fatih Birol has said, this is likely the biggest global shock to energy security in history. Asia, especially, is going to bear the brunt, particularly for price-sensitive countries that lack the necessary storage infrastructure and economic tools to mitigate the economic impacts.
• In the short-term, Asian governments may introduce defensive measures such as fuel rationing and price caps. Just as after the invasion of Ukraine, there are early signs of an accelerated shift to domestic renewable energy generation, which is cheaper and helps mitigate geopolitical risks compared to imported fossil fuels.
• As this crisis continues, we are likely to see a bidding war for the limited supply available. And often, what that means is when prices are skyrocketing, it's the emerging countries that get forced out. 

Sources & Resources: IEEFA Commentary by IEEFA’s Sam Reynolds and Ramnath Iyer;  Reynolds on BBC, ABC-CBN, and National Public Radio. 

Which countries in Asia stand out in terms of vulnerability? 

• In the case of liquefied natural gas (LNG), the lack of supply and storage can pose a real threat to Asian countries. IEEFA calculated that Pakistan, Japan, and the Philippines each sourced over 90% of their crude oil supplies from the Persian Gulf, and may also face the immediate risk of physical supply disruptions in the crude market.
  • As the world's sixth-largest solar market, Pakistan has become less vulnerable to energy shocks, thanks to its massive solar capacity, particularly in households and businesses.
• The government had also announced that it was no longer going to build any more LNG power plants in the wake of the Russian invasion of Ukraine because energy prices had skyrocketed.
• Even in richer Asian countries, Japan is not insulated from the direct impacts of the Strait of Hormuz closure.
  • Short-term fiscal measures such as subsidies and tax cuts tend to send the wrong market signals that encourage continued demand for fossil fuels.
  • Japan has spent over USD 77 billion on fuel subsidies between 2022 and 2024, but this level of fiscal support may not be sustainable for other price-sensitive Asian countries.
• Countries need to take coherent, intentional policy action to build energy and economic security and avoid reliance on imported fuels.
  • In the near term, steps to minimize the fallout's effects on vulnerable and poorer sections of society will likely be needed. However, subsidizing inefficient and expensive fuel use in general is not the long-term answer.
  • The necessary structural reform must be centered on higher reliance on freely available renewables. A second medium- to long-term priority should be to establish a modern, interconnected regional grid. 

Sources & Resources: IEEFA’s Ramnath Iyer in Bernama; IEEFA briefing note on US-Indonesia trade; IEEFA briefing note on Japan LNG; IEEFA slides on LNG in Asia.

What are the emerging patterns in Asia because of the conflict? 

• Overall, there are early signs of a long-term policy trajectory shift to renewables:
  • Very early on, President Lee Jae Myung of South Korea said that this Iran conflict is a great opportunity to rapidly and comprehensively transition to renewables.
  • The Philippines’ national energy emergency stated plans to accelerate the deployment of renewable energy and electric vehicles.
  • EV sales in the Philippines and Vietnam have boomed in March as buyers seek to insulate themselves from fuel price shocks.
• Commodity market shocks completely undermine the case for LNG as an affordable, reliable ‘transition fuel’, particularly for emerging markets.
  • Following Russia’s war in Ukraine, many Asian countries had already begun reevaluating the build-out of LNG import infrastructure, including Pakistan, which had instead begun importing large amounts of solar panels. The current conflict, if not deescalated quickly, could once again cause countries in Asia to reconsider LNG plans, potentially hindering the long-term growth of demand that the industry is counting on.
• Emerging markets in Asia are widely expected to be the largest growth markets for LNG demand globally, but — depending on the duration of the Iran conflict — they could once again find themselves at the mercy of global commodity markets and geopolitical uncertainty.
• Asia's surge in coal use is a short-term stopgap amid the Iran war, given that LNG power supplies remain limited and countries are unable to afford or procure available LNG cargos. Coal may not be directly affected by the Iran crisis. But as demand rises, coal prices are rebounding to historical levels. The more expensive this crisis becomes, the more likely we are to see shifts away from imported fuels towards domestic renewables. 

Sources & Resources: IEEFA’s Sam Reynolds in the Associated Press, on CNN and in The Financial Times. 

How is Australia affected by the latest global energy crisis? 

• Australia’s exposure to global oil shocks has dramatically increased in the past 25 years as our domestic oil production has dwindled. The situation is even more precarious because Australia has the smallest oil and petroleum stockpiles of all International Energy Agency (IEA) members.
• As the Iran conflict continues, Australia’s exposure presents significant economic risks. Oil is essential to many key economic sectors, such as mining and agriculture, and critical to the transport sector. Oil imports also have material influence on Australia’s trade balance and inflation.
• Despite being a major producer of gas, eastern Australia faces high gas prices because much of the product is exported as LNG. This leaves Australian households and businesses exposed to international price volatility amid disruption of exports from Qatar, the world’s largest LNG producer.  

Sources & Resources: DCCEEW: Australian Petroleum Statistics; Australian Energy Statistics. 

How dependent is Australia on fossil fuel imports? 

• The Middle East conflict leaves Australia facing a serious energy crisis. The country’s reliance on imported fossil fuels means that international crises frequently trigger high local petrol prices and threaten fuel security.
• Australia has very low stockpiles of key petroleum products, with reserves of petrol, diesel and jet fuel each equating to between one and two months of supply.
• Domestic oil production has slumped since its 2000-01 peak, amounting to just 5.6% of Australia’s demand today.
• Australia’s oil refining capacity has also fallen, with only two remaining domestic refineries, leaving the country reliant on regional suppliers for over 80% of its total petrol, diesel, and jet fuel needs.
• About 90% of Australia’s imports are sourced from Asia. Singapore accounted for 55% of petrol imports in 2025. South Korea supplies roughly 20-30% of refined products. Malaysia provides over 13%, and China, India and Taiwan are also key contributors to the overall import mix.
• This reliance on Asian refineries, which in turn import 60-70% of their crude from the Middle East, creates a significant supply chain risk for Australia.  

Sources & Resources: Seven charts in The Guardian; IEEFA Briefing Note: The perfect storm to boost energy security; Wood Mackenzie Report. 

How can Australia protect its energy security going forward? 

• Australia has a limited range of options to reduce its exposure to oil shocks. IEEFA believes boosting Australia’s dwindling petrol supplies should be the government’s first priority.
• Potential short-term measures could include rapid, low-impact steps to reduce oil consumption, which would make Australia’s stockpiles last longer without material economic impacts.
• In addition, Australia should explore bilateral crisis supply agreements with countries who supply it with refined oil products that are also major importers of LNG (for example, South Korea). These agreements should be supported by the fast-tracking of export control mechanisms for Australian LNG exporters.
• Electrification is the most promising solution to ensure the country’s longer-term resilience. Australia is lagging on electric vehicle adoption, and progress in electrification of the mining and heavy transport sectors is minimal. Government should urgently accelerate action in this area.
• Greater incentives are needed to enable households to become more energy efficient – both via appliance upgrades and practical measures. Government rebate programmes have materially boosted solar and battery uptake; they should be extended and enlarged.
• Rather than exporting LNG and forcing Australian households to pay higher prices for gas, a domestic gas reservation policy should be put in place. 

Sources & Resources: DCCEEW: Australian Petroleum Statistics; IEA; Australian government’s Transport Sector Plan; Electric Vehicle Council, Journal of Cleaner Production. 

What are the implications for Australia as an energy exporter? 

• Australia is a major producer of fossil fuels, with the vast majority of its exports going to Asia. Australia is the largest exporter of metallurgical coal, the second largest exporter of thermal coal and one of the top three LNG exporters in the world.
• LNG is crucial for export revenue, contributing significantly to Australia’s wealth through massive investment and export earnings.
• The overwhelming majority of Australia’s natural gas production (roughly 83%) is dedicated to LNG exports. In the Northern Territory, 97% of gas production is exported, while WA's domestic supply share is increasing due to lower production, not higher domestic output.
• About 90% of LNG exports go to Japan, China, South Korea and Taiwan. Japan alone receives over 40% of Australian LNG.
• Australia is now using its LNG clout to secure liquid fuel imports (petrol/diesel) from Asia amid the global market turmoil arising from the Middle East conflict. 

Sources & Resources: IEEFA’s Kevin Morrison in The Guardian, IEEFA in Bloomberg, IEEFA’s Josh Runciman in ABC Australia. 

What can be done to protect Europe’s energy security in the face of the global energy crisis?  

• Europe is facing the biggest wake-up call to electrify since the full-scale invasion of Ukraine. Structural gas demand reduction is the only durable solution to the crisis.
• Replacing gas consumption with renewables and energy efficiency is key to decreasing dependency on LNG imports and limiting exposure to gas supply disruption and geopolitical risk.
• If the EU delivers on its REPowerEU targets to 2030, this would mean:
  • 65.1 gigawatts of solar and 22 gigawatts of wind added annually
  • 10% annual increase in heat pump installations
  • Cumulative gas demand reduction of around 103 billion cubic metres
  • €30 billion saved on LNG imports
• EU gas demand declined by 20% between 2021 and 2024 thanks to REPowerEU measures, and essentially flatlined in 2025. 

Sources & Resources: IEEFA European LNG Tracker and EU Gas Flows Tracker; June 2025 commentary; IEEFA LinkedIn post. 

How dependent is Europe on imported LNG?  

• Europe reduced gas demand in the wake of Russia’s 2022 invasion of Ukraine but remains structurally dependent on imported LNG, leaving its energy security vulnerable to supply disruptions, price volatility, market uncertainty and geopolitical risk.
• LNG prices in Asia and Europe are converging well above pre-crisis levels. The two regions are competing for cargoes. 
• European gas storage levels are around 28% of capacity. Imports of U.S. LNG could increase to refill storage. The longer Europe waits to refill storage, the more it will have to pay to secure cargoes against competitors in East Asia, where buyers are more dependent on Gulf supply and face more acute inventory pressure. 

Sources & Resources: IEEFA’s Ana Maria Jaller-Makarewicz in Al Jazeera, BBC (Radio 4 Today, Business Today), CNBC, Euronews. 

How does the disruption of LNG supply from Qatar affect Europe?  

• In 2025, 8% of EU LNG imports came from Qatar, down from 12% in 2024.
• According to IEEFA’s estimates, the 65 gigawatts of solar that the EU installed in 2025 could generate enough electricity every year to replace the energy equivalent of EU imports of Qatari LNG in 2025 (11.4 billion cubic metres).
• Italy accounted for 53% of the EU’s imports of Qatari LNG in 2025, followed by Belgium with 19% and Poland with 17%.
• 6% of UK LNG imports came from Qatar in 2025.
• Household energy prices will be affected.  

Sources & Resources: IEEFA European LNG Tracker; LinkedIn post.  

How dependent is Europe on imports of U.S. LNG?  

• While Europe has decreased its dependency on Qatari LNG in recent years due to the disruptions in the Red Sea, the market share of U.S. LNG has increased significantly.
• If the Middle East conflict continues to disrupt LNG shipments from Qatar, the U.S. could supply 65% of Europe's LNG imports this year, up from 58% in 2024.
• US LNG is the most expensive LNG for EU buyers. EU countries spent over €117 billion on U.S. LNG imports between 2022 and the first half of 2025.
• If the EU fulfils all its supply deals for U.S. LNG and its gas demand reduction efforts falter, the bloc could source as much as 80% of its LNG imports from the U.S. in 2030, up from 57% in 2025. 

Sources & Resources: IEEFA commentary; IEEFA European LNG Tracker. 

How will Europe be affected if the crisis escalates?  

• Markets are now grappling with a scenario long discussed in theory but rarely thought of as a legitimate possibility — the effective shutdown of the world's most critical energy chokepoint. While the 1970s crises knocked out 7% of global oil supplies, the closure of the Strait of Hormuz affects 20%.
• With almost all global suppliers at maximum capacity, European leaders are beginning to realise that the LNG supplies they were counting on were not coming here as expected.
• Europe will start to feel the pain this coming month — perhaps within a few weeks. 

Sources & Resources: IEEFA in Politico.  

Why are LNG markets under such intense pressure right now? 

• Global LNG is already under stress. One-quarter of global LNG export capacity is offline as of early April.
• Ras Laffan, which accounts for nearly 20% of global output, is closed, with two of 14 trains damaged. Australian LNG output has been compromised by Cyclone Narelle, while Russian LNG output has been constrained by Ukraine attacks.
• Recent U.S. threats to Europe’s LNG have created new tensions and fault lines, impacting the reputation of LNG as “reliable”. 

Sources & Resources: Center on Global Energy Policy; Reuters on Wheatstone LNG; Reuters on Qatar LNG; IEEFA slideshow. 

How quickly could U.S. oil and LNG producers increase exports in response to the conflict? 

• A significant increase in U.S. exports could take months to materialize, and possibly a year or more. If retaliatory strikes cause prolonged disruptions to global oil and LNG production or trade flows, prices on international markets will rise. 
• Higher prices would create an incentive for U.S. producers to increase output, but beyond limited short-term gains, ramping up production takes time, at minimum, months and in some cases a year or more. Much will depend on how long the conflict lasts.  

Sources & Resources: Energy Mix; IEEFA in New York Times. 

How is the Middle East crisis affecting energy prices and energy security in South Asia? 

• The crisis has created a highly volatile situation for oil and gas markets, with risks to fuel prices, supply and wider economic stability across South Asia.
• In India, the main risks include higher fuel costs, broader inflation, a weaker rupee, higher borrowing costs, and higher government subsidy burdens — adding to fiscal stress. In Bangladesh, prolonged disruption in global fuel supplies could significantly affect energy and power supply. 

Sources & Resources: IEEFA’s Vibhuti Garg in AP and Fortune; Shafiqul Alam in The Financial Express Bangladesh; IEEFA op-ed in The Hindu. 

Why are India and Bangladesh especially vulnerable? 

• The core issue is import dependence, combined with exposure to the global spot market. India is heavily dependent on imported LPG, gas, and oil — with approximately 85% of its oil imported — and sources the majority from the Middle East.
• India imports 60% of its LPG and 48–50% of its natural gas. Bangladesh is also exposed through imported energy and LNG purchases linked to volatile global markets.  

Sources & Resources: IEEFA’s Purva Jain in Scroll; Shafiqul Alam in The Daily Star. 

What could this mean for households, industry, and the wider economy? 

• Higher fuel prices can feed into inflation, food prices, transport costs, subsidy burdens and industrial costs, making this both an energy security issue and a fiscal risk issue In India. The main risk is higher prices for perishable foods vulnerable to supply shocks.
• In India, the main risk is rising prices across household budgets — disproportionately affecting lower-income households. For industry, higher input and logistics costs are a concern, and if the conflict persists, job losses may follow. In Bangladesh, high spot LNG prices could further strain the energy sector, make LNG unaffordable, and increase the risk of gas and electricity rationing. 

Sources & Resources: Vibhuti Garg in AP and Fortune; Shafiqul Alam in New York Times and The Business Standard Bangladesh. 

What should governments do in response? 

• The answer is not simply more dependence on imported gas. Imported fuels can create both affordability and energy security risks.
• In India, electric cooking is one practical way to reduce exposure to imported LPG and gas. More broadly, the focus should be on a more stable and secure long-term direction, including renewable energy as a hedge against fossil fuel price shocks and supply disruptions.  

Sources & Resources: IEEFA op-eds in The Hindu and The Hindu — Energy power play; IEEFA report cited in India Today; Shafiqul Alam in The Business Standard Bangladesh. 

Can India reduce LPG dependence through electric cooking? 

• Electric cooking is 37% cheaper than non-subsidised LPG and 14% cheaper than piped natural gas for a family of four in Delhi.
• Scaling it will need a defined policy framework with measurable targets, along with incentives for consumers and manufacturers.  

Sources & Resources: IEEFA op-ed in The Hindu; IEEFA report cited in India Today. 

Could Bangladesh face rationing or load-shedding if the crisis continues? 

• Yes. The government might need to ration gas and electricity if the crisis continues.
• If spot LNG prices keep rising, subsidy burdens will increase further and energy supply will come under greater pressure.  

Sources & Resources: IEEFA’s Shafiqul Alam in New York Times and The Financial Express Bangladesh.