Beyond the barrel: Fixing a broken energy system

The 2026 Middle East conflict has triggered a severe global energy crisis, with the shutdown of the Strait of Hormuz halting over 13% of global oil supply and raising fears of a “doomsday” gas scenario, where prices could soar to $200 per barrel.

Addressing the crisis requires a multifaceted approach. The immediate priority is restoring safe passage through the Strait of Hormuz. In parallel, countries must release strategic petroleum reserves, potentially over 400 million barrels, to cushion supply shocks. Increasing output from non-Gulf producers, particularly the United States and other alternative suppliers, will also be critical.

At the same time, the crisis underscores the urgency of accelerating the shift to renewable energy, which offers insulation from volatile fossil fuel markets, after all, there are no price spikes for sunlight. Governments can also implement fuel-saving measures, such as rationing, as seen in Myanmar or promoting remote work to curb demand.

Oil prices have already surged past $100 per barrel, hitting industries and households alike. Across Asia, shortages of diesel and liquefied petroleum gas (LPG) are disrupting essential services, including food supply chains.

The risks are mounting. Analysts warn of a potential global recession, with stagflationary pressures reminiscent of the 1970s oil shocks. Attacks on critical infrastructure, including in the UAE, threaten to deepen the crisis further. Meanwhile, repairing damaged LNG infrastructure could take months, prolonging supply disruptions. Developing long-term, self-sufficient energy strategies and reducing dependency on the Middle East for fuel imports is critical.

Two weeks into the conflict, the war between the United States and Iran has already had far-reaching consequences, thousands dead, over $11 billion spent, and rising fuel costs straining household budgets, particularly in the U.S.

Diplomatic efforts remain fragile. Previous negotiations collapsed, with Iran citing a lack of trust in Washington after earlier talks broke down and were followed by renewed hostilities.

While some reports suggest “meaningful progress” in negotiations, both sides appear to be preparing for a prolonged conflict. The United States aims to curb Iran’s regional influence and secure the Strait of Hormuz, while Iran is demanding an end to what it calls “aggression,” along with reparations and recognition of its authority.

U.S. President Donald Trump has claimed that “great progress” is being made in talks. However, he has also issued stark warnings that if Tehran does not agree to a deal and reopen the Strait soon, the U.S. could target Iran’s critical infrastructure, including power plants, oil facilities, Kharg Island, and desalination plants.

Any attack on Iran’s energy sector—particularly Kharg Island, through which around 90% of its crude exports pass—could have devastating consequences for Tehran’s as well as global economy.

Even as negotiations continue, the U.S. is expanding its military presence in the region, deploying thousands of Marines and sailors. Tehran has cited this buildup as evidence that Washington is not serious about peace. Iran has denied engaging in direct talks with the U.S. and has rejected Trump’s proposed 15-point peace plan as “excessive and unreasonable.” With both sides entrenched, the path to resolution remains uncertain, and the global energy market hangs in the balance.