Emily Holland, Eurasia Program Director

With the world still reeling from the effective closure of the Strait of Hormuz, through which approximately one fifth of global oil is shipped, Iran’s ballistic missile attacks on Qatar’s LNG infrastructure have sent global energy markets into turmoil. Prior to this attack, the effect of the war in Iran on energy markets was largely determined by the duration of the conflict. A short-term closure to the Strait would spike prices but was unlikely to cause the stagflation that occurred after the 1973 oil crisis because the world’s energy systems are far more diversified and resilient than they were then.

Russia is an immediate winner. Higher oil prices mean higher revenues for the Kremlin, and tighter LNG markets will increase the relative value of its pipeline gas. Washington also temporarily licensed already loaded Russian cargoes to ease constrained oil flows, marking a reversal in the Western led sanctions regime that has been in place since 2022.

The effects of the shock to the gas markets will be stark. As Europe and premium Asian consumers outbid others for scarce and expensive LNG, poorer-import dependent economies are priced out. Countries such as Thailand face acute exposure and will be forced into fuel switching, demand destruction, or fiscal strain. Energy security is increasingly determined by the ability to pay for it.

All this feeds into a much deeper constraint. The volatility in the hydrocarbons markets now, and in 2022, show that resilient electrification of energy systems is key to enhancing energy security. But a faster, more infrastructure heavy transition requires more capital while the fiscal space is tightening. Competing priorities including clean tech supply chains, grids, and storage must all be simultaneously funded. If the energy shock tips the world into stagflation, enhancing energy security may be financially non-executable at the very time we need it most.

Maximilian Hess, Senior Fellow 

​​The US and Israel’s war against Iran – and failure to prepare for Tehran’s inevitable, and thus far successful, attempts to close off the Strait of Hormuz – portends a crisis stretching far beyond oil markets. The Strait is indeed the single most important geographical choke-point for oil, but it is an even more significant one for natural gas.

Qatar exports roughly one-fifth of the world’s annual production of LNG. While Saudi Arabia has been able to divert a large portion of its oil exports to terminals on the Red Sea thanks to the East-West pipeline cutting across the country, Qatari LNG has no way of reaching global markets beyond the Strait.

 And Iran has put it directly in its cross-hairs, with Qatarenergies reporting that a March 18 strike on its flagship Ras Laffan plant damaged around 17% of production and may take years to recover from. The last major explosion at a LNG plant – the June 2022 industrial accident at Freeport in Texas – took more 18 months to repair, and starved markets of a critical resource as Russia was weaponizing its gas supplies and causing the largest gas market crisis the world has yet experienced.

The crisis in global gas supplies may be far larger still. LNG tankers are highly combustible. While some oil tankers have run the Strait amid Iran’s threats – and further may still if the US supplies insurance and escorts as the Trump Administration has pledged – LNG tankers are highly unlikely to do so.

Even if there are no further successful Iranian strikes on Qatar’s facilities, its gas is likely to remain trapped as long as the IRGC threaten drone attacks. A repeat of 2022’s gas and energy crisis is the base case.

Joshua Busby

The war in Iran led to the closure of the Strait of Hormuz which took nearly one-fifth of oil and natural gas supplies offline. Because oil is priced as a global commodity, price shocks go global, affecting consumers around the world, Americans included. Natural gas markets are less globally integrated, so natural gas production disruptions have more limited effects on supplies and prices Americans pay.

Energy markets may have initially underpriced the risk of an extended war in Iran on the expectation that Trump would declare victory and end the conflict. However, the longer the conflict goes on, markets may readjust particularly in the wake of more serious attacks on energy infrastructure, both in Iran and in Qatar in the last few days. This could lead to dramatic increases in prices both oil and for natural gas, with emergent shortages, particularly in Asia, leading to closures of schools, factories, and other sectors.

It is also less clear that even a declaration of victory by President Trump would be heeded by Iran, which may want more guarantees from both the United States and Israel that the attacks will not resume. While the Trump administration may seek that outcome, it is less clear Israel would follow suit. For example, when Israel bombed Iran’s South Pars natural gas fields earlier this week, the Trump administration, somewhat implausibly, said it knew nothing about it. An end to the current war may require a diplomatic solution, which none of the parties appear poised to pursue at this time.

Greg Pollock

Israel’s attack on Iran’s South Pars gas facilities, and Iran’s retaliatory strike on ​Qatar’s Ras Laffan liquefied natural gas (LNG) plant, have heightened significantly the Iran conflict’s impact on energy markets.  Oil prices briefly rose to nearly $120 a barrel, and natural gas prices in Europe have now doubled since the conflict began.  After the largest 30-day price spike since Hurricane Katrina devastated energy facilities along the Gulf Coast more than twenty years ago, Americans are now paying an average of $3.88 per gallon at the gas pump, with Californians shelling out nearly $6 a gallon. 

Despite these worrying trends, traders and investors are likely still underpricing the sustained risks to energy markets on the expectation of a relatively quick end to the conflict.  However, QatarEnergy’s CEO announced today that about 17% of Qatar’s LNG export capacity will be offline for perhaps the next 5 years, with billions of dollars in repairs now required. 

If the current escalatory cycle continues, energy markets will no longer be facing a short-term supply shock, but the prospect of large-scale, long-term damage to systemically important energy infrastructure across the Middle East.  This dynamic would produce a sustained inflationary effect, with profound—and unpredictable—political, social, and economic consequences.  Higher fuel and food prices are notoriously destabilizing, particularly across the developing world, and these conditions will constrain central banks, erode real incomes, and imperil incumbent officeholders everywhere. 

The best thing all parties to the conflict can do now is embrace a moratorium on attacks on civilian infrastructure, including oil and gas facilities, and find their way to the negotiating table before this conflict widens further and becomes yet another “forever war.”

Maria Shagina

​​The conflict in Iran underscores the “sanctions trilemma”: penalizing three major oil producers—Iran, Venezuela, and Russia—simultaneously during an energy shock is a volatile gamble. To curb the burgeoning energy crisis, the US administration has issued general licenses for Russian and Venezuelan oil while weighing the removal of sanctions on Iranian exports.

Russia is emerging as the main beneficiary. Washington’s decision to issue a 30-day general license (GL 134) for Russian-origin crude and petroleum products already loaded at sea lands at a sensitive moment for the Kremlin. After weak export revenues in January–February, Russia was beginning to feel pressure from softer oil prices. The Middle East shock has reversed that dynamic: Urals crude shifted from deep discounts to a $5–$10 premium over Brent. If conditions persist, Russia could net $3.3–$5bn in extra revenues by the end of March. The license also eases “shadow fleet” bottlenecks, ensuring cargo flow and vessel availability. While expiring April 11, an extended conflict makes a renewal likely.

The true boon for Moscow remains high global prices, which blunt the impact of the US’ most consequential energy measures—on Rosneft and Lukoil. This creates a widening transatlantic rift; while the US relaxes restrictions to stabilize markets, the EU and UK are tightening them. The key question is whether Washington would loosen restrictions on Russian oil production to alleviate the energy crisis if it worsens.

Second-order effects are emerging. Higher energy prices are likely to further postpone the EU’s plans to introduce a maritime services ban as part of its 20th sanctions package. Disrupted flows of Gulf LNG could reopen space for Russia as a marginal gas and fertilizer supplier, testing Europe’s phase-out ambitions.

Nicholas Trickett

There is no analogous event for energy markets to which we can compare the current interruption of transit in the Strait of Hormuz. Further escalation will risk entrenching current risks into regional transit for months to years depending on the course of the conflict. But the immediate consequences for cleantech and its value chains pull in opposite directions. On one hand, the risk of oil prices breaking historic records and physical shortfalls of LNG will push poorer, import dependent economies to accelerate the energy transition as fast as possible while richer import dependent states and regions cobble together responses with coal, nuclear restarts, heat pumps. Rationing may prove unavoidable. 

On the other hand, cleantech value chains are themselves at risk of disruption. The loss of aluminum supplies from Qatar and Bahrain has some effect driving up prices for solar PVs, but more relevant is the loss of over 40% of the world’s sulfur exports. Sulfur is a key feedstock for sulfuric acid, an input for leach extraction in a wide range of metals including copper. Beyond that, miners consume diesel for haulage and generators. Expect a renewed scramble to electrify power generation and transport onsite wherever possible to hedge against these disruptions. Similarly, expect the most price sensitive hydrocarbon importers to grab whatever alternative they can manage and deploy it.  

Ultimately, demand-side factors will crowd out supply side ones. For all its limitations, being able to generate power with solar or wind and store it in a battery is a more effective tool to hedge the scale of geopolitical risk now at play due to US policy. Onshoring power generation is now imperative for resilience. Further, producing molecules with cleantech or leveraging existing infrastructure will also get a fresh look as will biofuels. Not all consumers want to pay more for security, but when faced with the prospect of physical shortages on a scale we have not seen since WWII, consumer behavior will likely adapt. So will the geopolitics of energy.

All views expressed are the authors own. 

Image credit: March 9, 2026, Alexandria, Virginia, USA: Fuel prices at a Sunoco gas station in Alexandria, Virginia, USA, on March 09, 2025. (Aashish Kiphayet/ZUMA Wire vis Reuters)