The energy shock from the Iran war
has policymakers around the globe rethinking ways to reduce
long-term dependence on oil and gas imports, with proposals to
expand nuclear energy and renewables, grow strategic stockpiles
and domestic production, and diversify foreign sources of
supply.
Iran’s closure of the vital Strait of Hormuz shipping lane,
after the U.S. and Israel attacked on February 28, marks the
third time this decade that an international energy shock has
forced governments to reckon with the risks of a world dependent
on the free flow of vast quantities of petroleum to fuel its
economic engine. It has also stoked the view that the fossil
fuel age must end, after pushback in recent years to ongoing
efforts to mitigate climate change.
“The issue of energy security has never been as acute as
now. Until a few weeks ago, markets took Gulf resources for
granted. That will not be the case going forward,” said Geoffrey
Pyatt, who was assistant secretary of state for energy resources
under Joe Biden and is now a senior managing director at U.S.
consultancy McLarty Associates.
The world’s biggest energy consumer nations are now back at
the drawing board: Europe last week unveiled new financial
guarantees for atomic power after decades of closing nuclear
plants. Other major importers are planning to source fuel from a
broader array of suppliers to hedge their risk.
In a timely article about a potential blockage to Hormuz, a
department within China’s state planner, which shapes the
country’s economic strategy, said on the first day of the war
that the country should accelerate its renewable energy
transition, as well as expand its emergency reserves and source
more energy from alternative suppliers.
“Not only China, but around the world,” governments “will
reconsider their energy supply lines and production systems and
perhaps pay more attention to nuclear and clean energy,” Wang
Jin, senior fellow at the Beijing Club for International
Dialogue, a think tank under the purview of the foreign
ministry, told Reuters.
China is already the world’s leading source of clean energy
technologies.
In the shorter-term, big consumer nations have opted for a
record-sized coordinated release of emergency stocks, along with
requests by governments – particularly in Asia – for consumers
to conserve energy.
Around 20% of world oil and liquefied natural gas supply has
been blocked after Tehran effectively locked down Hormuz – the
main artery for Middle East fossil fuels headed to world
markets. The International Energy Agency has called it the worst
disruption to global energy supplies in history. Global crude
oil prices have surged to above $100 a barrel.
The crisis follows two previous major energy upsets of the
2020s: Russia’s 2022 invasion of Ukraine led Europe to slash its
dependence on Russian imports; and the 2020 COVID19 pandemic
that triggered a sudden, massive decline in world demand for
fossil fuels followed by a rebound that world’s top producers
were ill-prepared to meet.
ASIAN DEPENDENCE
Asia sources the vast majority of its oil and LNG imports
from the Middle East, making it the region most affected by both
higher prices and physical supply disruption caused by the Iran
conflict.
The issue has revived support in some corners for nuclear
energy as a way to reduce regional reliance on power fueled by
natural gas and other fossil fuels.
In Taiwan, economy minister Kung Ming-hsin said on March 11
the island is considering restarting its last nuclear station,
which closed in May, after the main opposition party lambasted
the government following the start of the Iran conflict for
phasing out nuclear power. Around one-third of Taiwan’s LNG
supply comes from Qatar, whose production has been cut by the
fighting.
Tokyo had already been discussing the restart of reactors
idling since the 2011 Fukushima disaster, as Japan looks to
reduce the country’s large dependence on energy imports. But
politicians have called on Prime Minister Sanae Takaichi to do
more to boost the industry since the start of the Iran war.
Taiwan’s economy ministry said the use of nuclear power must
be premised on ensuring nuclear safety. Taiwan will continue the
expansion of renewable energy and natural gas storage facilities
to increase safety reserves, it said. Japan’s industry ministry
did not reply to a request for comment.
In China, the world’s top buyer of Iranian oil, refiner
Sinopec has cut production by 10%. Beijing has also banned fuel
exports to help avert domestic shortages.
China has, however, been relatively insulated from the
crisis due to its ample emergency oil reserves and high rate of
electrification, with EVs representing more than half of its
domestic new car sales and its grid more than 50% powered by
renewable energy sources.
In the U.S., by comparison, EVs are less than 10% of the
market, while renewable power is around a quarter of the
nation’s electricity generation.
Jin, of the Beijing Club think tank, said China saw the Iran
crisis as an opportunity to create new avenues for cooperation,
and that Beijing sought friendly, stable energy relations with
all producers.
China’s foreign ministry declined comment and the National
Development and Reform Commission did not respond to a request
for comment.
Government officials and company executives in Japan,
Taiwan, Bangladesh and Pakistan have said they also plan to
diversify their import sources and buy LNG on the spot market,
instead of relying on long-term contracts from the Middle East.
“A STRATEGIC MISTAKE”
The cost of the EU’s fossil fuel imports, meanwhile, has
risen by 6 billion euros since the start of the war, putting
massive upward pressure on the continent’s power prices.
Being “completely dependent on expensive and volatile
imports” of fossil fuels puts Europe at a structural
disadvantage to other regions, European Commission President
Ursula von der Leyen said in a March 10 speech, while putting
forward a new program to offer a 200 million euro guarantee for
private investments in innovative nuclear technologies.
Reducing the share of nuclear in the overall mix of power
supplies in Europe over the past 25 years “was a strategic
mistake,” von der Leyen said.
EU member states led by Germany had shut down nuclear plants
in recent decades amid worries about accidents and radioactive
waste, reducing generation to a 15% share of the trade bloc’s
total from about a third in 1990.
To shield residents and businesses from spiking power costs,
the European Union is drafting changes to its carbon market to
try to curb CO2 prices, alongside state aid measures like
subsidies and tax breaks.
RUSSIAN PERKS
As the world’s largest oil and gas producer, the United
States is less concerned about domestic supply shortfalls. It
sources only a small amount of its imports from the Middle East.
But Washington is focused heavily on ways to tame global energy
prices while conducting the war.
A White House official said the disruption to Middle East
supply was a reason for countries to increase production of
fossil fuels, not replace them.
“The terrorist Iranian regime’s control over a chokehold
like the Strait of Hormuz has proven that our allies need to
invest in infrastructure to produce reliable, affordable, secure
energy sources like crude oil and natural gas,” said White House
spokeswoman Taylor Rogers.
Consumer price inflation is a key vulnerability for
President Donald Trump and his Republicans leading into
November’s midterm elections.
As part of efforts to boost global supply, the Trump
administration has eased sanctions on Russia to allow other
countries to purchase more Russian oil.
The Iran crisis may also prompt a reassessment of western
sanctions on Russian LNG, according to analysts, as the EU and
Asian importers struggle from the loss of supply since the onset
of the conflict.
LNG makes up 45% of the EU’s total gas imports, up from 20%
in 2021, before the 2022 Ukraine war led European nations to
replace Russian pipeline gas.
“EU politicians are back on the backfoot,” said a gas trader
at Vitol, a commodity trading house. “This looks like 2022 all
over again.”
The EU’s ambitious plans for green energy could eventually
limit its exposure to oil disruptions. But it also risks
building a new dependency on China, said Bart Groothuis, a
member of the European Parliament and vice-chair for the
delegation for relations with Iran.
“We’re building new dependencies and new problems inside our
energy infrastructure by building dependencies, total
dependencies, on Chinese hard and software,” Groothuis said.
Published on March 19, 2026
