Even if the Iran war ends, the next fossil fuel shock is already on its way

The escalating conflict between the United States and Iran has exposed a fundamental weakness in the global economic system: the reliance on fossil fuels creates widespread vulnerability to regional instability. While protecting lives remains the immediate priority, the broader implications extend far beyond the Middle East, affecting economies and households across the world.

The closure of the Strait of Hormuz has triggered cascading economic effects globally. In East Asia and Southeast Asia, fuel costs and inflation have risen sharply in economies dependent on imported oil and gas. African and Latin American nations face additional burdens on already impoverished communities as fuel prices climb. Developed economies in Europe, North America, and Australia have experienced increased transport costs, electricity bills, and consumer prices. This phenomenon, termed fossilflation, represents the inflationary pressure inherent in an economic system heavily reliant on fossil fuels.

International economic institutions have documented the conflict's impact. The Organisation for Economic Co-operation and Development has warned of rising inflation and weaker growth driven by higher energy prices, noting that governments in at least 46 countries have introduced emergency measures to shield households and businesses. The International Monetary Fund, World Bank, and World Food Programme have cautioned that elevated oil, gas, and fertiliser prices are increasing food insecurity, with estimates suggesting 45 million people could face acute hunger.

The analysis argues that what appears to be an unfortunate geopolitical consequence is actually an inherent feature of the fossil fuel system. The industry has become adept at exploiting conflict dynamics and energy shocks for profit. The solution lies in building energy independence through decentralised renewable energy generation. Every increase in locally produced renewable energy weakens the connection between international crises and household costs, making countries more resilient and economically secure.