SHORT TAKE: The fossil fuel age might not be over, but the largest supply disruption in the history of the global oil market is a wake-up call for governments, businesses and consumers everywhere. The real vulnerability is not transitioning to renewables but continued dependence on volatile, geopolitically constrained fossil fuel markets and their destructive emissions.
The disruption to oil flows through the Strait of Hormuz has exposed just how concentrated and fragile our global energy systems and economies remain. With roughly one-fifth of the world’s oil moving through a single chokepoint, the market reaction has been immediate, with sticker-shock prices and widespread supply concerns. The International Energy Agency has described it as “the largest supply disruption in the history of the global oil market.”
For governments, corporations and consumers, this latest disruption goes beyond another cycle of price volatility and highlights a much deeper and dangerous dependence, driven by reliance on a fuel system shaped as much by geopolitics as by supply and demand. The real vulnerability extends beyond the pace of transition to the cost of remaining tied to markets that are constrained, politicized and ever prone to disruption.
The current conflict also forces a rethink of where investment flows next. Expanding fossil fuel supply does little to reduce this dependence. Scaling clean power, alongside alternative fuels for sectors that can’t easily electrify, like aviation, cuts that dependency, particularly as electricity demand is booming with the growth of AI and data infrastructure.
Recent history offers a precedent. Europe’s exposure to Russian gas left it vulnerable to sharp price increases and supply constraints following the invasion of Ukraine. These shocks ripple quickly through the economy, contributing to inflationary pressure tied directly to energy markets, sometimes described as ‘fossilflation,’ complicating efforts to stabilize costs and threatening global financial stability.
They also raise longer-term questions about capital allocation. Infrastructure tied to fossil fuel production, such as coal-fired power plants or oil drilling platforms, faces increasing financial pressure of underutilization or write-downs as energy systems diversify. That dynamic is already influencing behavior. Some major insurers, for example, have begun reducing their involvement in fossil fuel projects, factoring in both climate-related losses and the long-term viability of these assets.
Dependence on fossil fuels also concentrates risk geographically. Around 80% of the global population lives in countries that are net importers, leaving energy supply and pricing exposed to a relatively small number of petrostates and producers. Breaking that dependence gives nations and corporations greater control over supply and cost. It also limits regulatory and legal exposure associated with emissions, without assumptions about future market conditions.
Government responses to the Iran war reflect a growing policy focus on cutting dependence on fossil fuel markets. The U.K. has introduced measures to accelerate clean energy deployment, including unlocking solar developments on public land and simplifying planning processes. It has also signaled plans to decouple electricity prices from gas, a move designed to limit the pass-through of fossil-fuel volatility to consumers and businesses.
At a regional level, the European Union is pushing for faster deployment of renewable and nuclear energy through its Accelerate EU initiative, alongside an upcoming Electrification Action Plan aimed at removing barriers across industrial, transportation and building sectors.
In the Global South, Pakistan shows how investment in renewables can buffer against oil and gas market shocks. Its recent ground-up solar expansion has softened the impact of fuel price rises caused by the blockade. To date, the country has avoided more than USD 12 billion in oil and gas imports and is projected to save a further USD 6.3 billion by the end of the year.
Progress is happening elsewhere, too. An international conference pledged to “shift away from fossil fuels” and expose how much participating nations subsidize them, while advancing financial reforms to address the fiscal, debt and subsidy traps that lock countries into fossil fuel use, according to the Financial Times.
The AI revolution is adding a new layer of pressure to our energy systems. As demand for data processing grows, so does the infrastructure required to support it. Data centers accounted for more than one-fifth of global greenfield project values in 2025, according to UN data, making them one of the largest destinations for new capital investment.
That makes them a key driver of the expected doubling of global electricity demand by 2030. What on earth will power this explosive growth? At present, the U.S. administration’s climate stance appears to have swayed big tech companies that previously led on renewable investment, such as Microsoft, which recently paused its carbon removal purchases. At the same time, investment in climate technology has fallen, from $30.7 billion in 2021 to just $17.6 billion in 2025, according to JPMorgan analysis.
Too much capital is still directed toward systems that lock in fossil fuel generation and transmission patterns built for ongoing fuel volatility. That creates a dangerous dynamic. If new demand is met with fossil-fuel-backed capacity, consumers and businesses will inherit higher operating costs, continued susceptibility to geopolitical price shocks, and potential asset write-downs as policies and energy systems evolve.
A more effective approach is to invest in the components that can make AI clean and resilient: renewable buildout, 24/7 carbon-free electricity, transmission and storage, demand flexibility and energy efficiency. This improves cost predictability, prevents dangerous levels of emissions, and avoids locking in another cycle of fossil-fuel dependence.
Another critical transition challenge is decarbonizing hard-to-abate sectors such as heavy-duty trucking, chemicals, shipping, steel and aviation.
These industries rely on concentrated energy sources or emissions-intensive processes and account for roughly 25% of global energy consumption and 20% of carbon dioxide emissions. But the sheer complexity of these problems doesn’t mean they should be put on hold.
Take the aviation sector. Research and development into sustainable aviation fuels (SAFs) remains essential, as the technology needed to electrify passenger or cargo aircraft at scale does not yet exist. The main barrier to scaling SAFs is the limited supply of feedstocks used to make them, such as rapeseed or soybean oil.
Some innovators are already developing alternative solutions, such as jet fuel derived from microalgae grown in deserts using seawater and sunlight, developed by U.K. bioenergy company HutanBio. But these approaches and companies require far greater backing. To ensure the aviation sector doesn’t backslide further on energy transition, governments and investors should promote and back-feedstock supply innovation and do the same for green solutions in other hard-to-abate sectors, too.
The events around the Strait of Hormuz won’t mark the end of the fossil fuel system. They do, however, make the scarcity of oil and gas, and the vulnerabilities that come with it, impossible to ignore.
Moving to low-carbon energy sources reduces system risk and creates new commercial opportunities. It also addresses the tangible consequences of climate change, which have slipped down the agenda despite growing in severity.
Governments, corporates and consumers face a choice. Reduce and, over time, eliminate reliance on outdated, dirty fuels that drive geopolitical conflict and the collapse of our ecosystems, and commit to renewable energy that can sustain our needs and planet for generations to come.
Let’s hope it doesn’t take another conflict or a bigger, catastrophic war to force that decision.
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