The Forcing Function
The first fifty days of the Iran war pushed international geopolitics and energy markets back to the edge. What will we make of the view from here?
At the time of writing, Brent crude is trading somewhere in the mid-$90s, having oscillated between the $70s and $120 over the last seven weeks. A ceasefire between the United States, Israel and Iran teeters on the brink. A US naval blockade of Iranian ports went into effect on 13 April after peace talks in Islamabad broke down. The US has seized its first Iranian vessel, Touska, and Iran has vowed to retaliate. QatarEnergy has not yet lifted its force majeure declaration on LNG contracts. Dutch TTF gas, the European benchmark, settled last week at roughly €44/MWh — above the €35.5 pre-war level but well below the €61.93 peak of 19 March. EU storage is being refilled at prices that no finance minister wanted to contemplate in January.
When I wrote Iran, Resources, and the Next Act in February — just before the strikes began — the argument was that a second military act against Iran would land hard on Europe and the UK, and that a commodity shock could be expected. So far, the story is playing out. Between 28 February and 27 March, Brent rose from $72.48 to $112.57 — a 55% move in four weeks. QatarEnergy declared force majeure on all LNG exports after Ras Laffan was struck on 18 March, wiping 17% of Qatari liquefaction capacity that analysts say will take three to five years to fully repair. The IEA called it the greatest energy security challenge in modern history — and the largest oil supply disruption on record.
Even this early, some of the first patterns are becoming clear. Between this war and the last one. Between what damaged infrastructure does to the atmosphere, and what price shocks do to demand. Between the United States and every ally whose prosperity depends on energy it does not produce. And, underneath all of it, the argument that I made in The Edge.
The Russia–Ukraine Playbook, Run Again
In February 2022, Russia invaded Ukraine. Within ninety days, wheat futures had reached $12.94 a bushel, urea hit $1,040 a tonne, European gas crossed €200/MWh, and food price inflation became the single largest contributor to a cost-of-living crisis that brought down governments across the Western democracies. The mechanism was simple and devastating. Ukraine and Russia were the world’s breadbasket; Russia and Belarus were its fertiliser factory; Russia was Europe’s gas station. Disrupt those flows and the shock travels, predictably, from pipelines into supermarkets, from supermarkets into inflation expectations, and from inflation expectations into the ballot box.
The Iran war is running the same playbook — only with a different supplier list and, in several respects, worse concentration. The Middle East exports roughly 35% of the world’s urea, 53% of its sulphur, and 64% of its ammonia. Urea futures in Egypt — the bellwether for nitrogen fertiliser pricing — moved from $400–$490 per tonne before the war to around $700 per tonne within three weeks of the first strikes. Urea is up around 50%. Ammonia is up around 20%. Chinese urea exports have been restricted to protect domestic supply. Morocco’s phosphate, Canada’s potash, and Russia’s complex fertilisers have absorbed price gains in sympathy.
Energy costs represent roughly 70% of the input cost of nitrogen fertiliser. The consequences are tiered, and they map onto the same geographical pattern that we saw in 2022. The Gulf Cooperation Council (GCC) states, which depend on the Strait of Hormuz for over 80% of their caloric intake, went into a “grocery supply emergency” by mid-March, with 70% of regional food imports disrupted. The Northern Hemisphere’s spring planting decisions have already been affected; the US Department of Agriculture’s Prospective Plantings report shows corn and wheat acreage down roughly 3% year-on-year, both being the most nitrogen-intensive grains. And the countries that will carry the worst of this are the fertiliser-importing food-importing nations in Africa and South Asia — Sudan, Somalia, Bangladesh, Pakistan — whose exposure to nitrogen-fertiliser pricing is the highest and whose fiscal capacity to subsidise is the lowest. The World Food Programme estimates the food-price peak from this conflict will hit approximately four months after onset — which takes us to late June.
There is a water dimension too, too rarely discussed. The Persian Gulf coastline hosts hundreds of desalination plants. Saudi Arabia, the UAE, Kuwait, Qatar and Bahrain produce the majority of their potable water from them. Those plants run on natural gas. They are vulnerable to direct attack, to indirect disruption from damaged feedstock supply, and — most catastrophically — to major oil spills from damaged tanker traffic. The Conflict and Environment Observatory flagged desalination as a top-tier regional risk on 27 March. The attack on Iran’s Dena frigate off Sri Lanka triggered an oil spill. Port strikes at Abu Dhabi, Dubai, Jebel Ali and Manama have damaged vessels with fuel oil aboard. A serious spill event in the Gulf would not just stop ships. It would stop taps.
The Environmental Paradox
Firing missiles, burning refineries and rupturing pipelines all release carbon. The Climate and Community Institute has estimated that the first fourteen days of this conflict produced over 5 million tonnes of CO₂ equivalent — roughly one year of emissions from 1.1 million petrol cars. Infrastructure damage accounts for the largest share: approximately 20,000 civilian buildings damaged in Iran so far, translating to around 2.4 million tonnes of embodied carbon. Fuel combusted by aircraft, drones, and support vessels adds another half a million tonnes. The Tehran oil storage fires alone burned between 2.5 and 6 million barrels. Annualised, the emissions footprint of this war is estimated as somewhere between Kuwait’s total and the combined emissions of the 84 lowest-emitting countries.
That is the direct climate cost. The indirect cost is larger — but it cuts two ways.
On the one hand, there is the risk of fossil fuel lock-in. After Russia invaded Ukraine, China increased coal production and wrote coal expansion into national energy plans on energy-security grounds. European countries did not go backwards to coal, but they did lock in long-term LNG contracting that will persist for decades. The political reflex of importing states is to increase supply optionality — which, in practice, means more fossil infrastructure.
On the other hand, a sustained commodity price shock reduces fossil demand. It is a basic mechanism of commodity economics. When petrol crosses $4 a gallon in the United States, Americans drive less. When household energy bills spike in Europe, people insulate their houses, instal solar panels and buy heat pumps. Destruction is the dirty half of the equation. Demand response is the clean half.
The environmental balance paradox has not yet played out. What seems increasingly likely, however, is this: the first six months of the war have done measurable near-term damage, while the second-order effects — demand destruction, accelerated deployment of distributed alternatives, and the re-pricing of resilience as a premium — run in the other direction. Which effect dominates over five years depends almost entirely on which infrastructure choices policymakers make in the next twelve months. More LNG terminals will lock in emissions. More efficiency, distributed generation, and storage will reduce them.
Price Shock, Absorbed Unevenly
According to energy analysts, a $10 rise in crude translates, roughly, to 3–6 euro cents per litre at the European pump. Apply that to a $40 move and you have one of the bluntest transmission mechanisms from geopolitics to household politics that modern economies possess. In the United States, gasoline prices crossed $4 per gallon by the end of March — the highest since late 2023 — having risen 30% since February. European diesel wholesale prices followed this move in dollar terms, amplified by a weaker euro. British households with pre-war fixed-rate energy contracts are discovering what that protection is worth when the next renewal window opens.
European gas — the part of the shock I flagged in February as more structurally damaging than the crude move — has behaved as the Qatari concentration implied. Dutch TTF moved from €35.5/MWh pre-war to €61.93 at the March peak, a 75% move, on the back of the Ras Laffan strike and force majeure declaration. It has since retreated to the low-€40s, but that is still a 25% premium over pre-war, and analysts note that the floor is likely higher than pre-crisis because Europe must refill its critically low storage into a market that now trades at a geopolitical risk premium. Germany, France, the Netherlands — indeed, every major gas consumer entered this war with storage at the lowest level for the time of year since the run-up to Russia’s invasion of Ukraine. They are now trying to refill it at prices that will feed into industrial energy costs for the next year to eighteen months.
But there is a critical asymmetry between the United States and Europe.
The United States is a net energy exporter — on a total energy content basis, though not on a crude oil basis, where it remains a net importer of 2.2 million barrels per day. An oil price spike is, for the US economy in aggregate, a terms-of-trade windfall. US LNG exporters have picked up material incremental demand from Europe and Asia as alternatives to Qatari supply. US crude exports have surged to near-record levels. The US is close to net-exporter status on crude for the first time since World War II. Washington benefits from this crisis three times over: as the military actor, as the safe-haven currency beneficiary, and as the backup supplier to the allies worst affected by the disruption it caused.
Europe and the UK are the reverse image. The EU imports 98% of its oil and 90% of its gas. The UK imported 44% of its total energy in 2024, with North Sea production in structural decline. In a geopolitical shock, dollar strength can further amplify the commodity price rise in euro and sterling terms. The UK Chancellor Rachel Reeves has already confirmed that strategic oil reserves stand ready for release. That is a one-time tool. Every finance minister in Europe is doing the same arithmetic: how many more shocks can our households absorb before 2022-style political fracture returns?
Energy cost is one of the most direct links between geopolitics and domestic politics that exists in modern economies. European electorates demonstrated it repeatedly between 2022 and 2024. The current price move is smaller in absolute terms than 2022 but lands on populations that have, materially and psychologically, not recovered from the last one.
The Chessboard Widens
I argued in February that Iran links four theatres of resource competition simultaneously, and that a strike on Iran would be read in Moscow, Beijing, Caracas and the Gulf capitals as a signal about the second, third and fourth theatres. That argument is playing out.
China has formally declared neutrality. What that means in practice is that Beijing has kept buying Iranian oil — roughly 90% of Iran’s crude exports ordinarily go to China — while avoiding any direct military entanglement, and has evacuated over 3,000 Chinese nationals from Iran. Strategically, the picture is more interesting. China entered 2026 with approximately 120 days of crude cover for its refineries, having stockpiled aggressively in January and February on the view that a conflict was coming. Russia has stepped up oil exports to China by roughly 300,000 barrels per day. On 15 April, Russia’s Foreign Minister Lavrov met China’s President Xi in Beijing and both governments explicitly reaffirmed what they described as unshakable energy cooperation. Lavrov was quoted saying Russia and China ‘have all the capabilities’ to avoid dependence on this kind of aggressive adventure in the Middle East. That is not the language of neutrality. That is the language of accelerating decoupling.
The strategic calculation for Beijing goes beyond oil. For example, every week the US military is consumed in the Gulf is a week in which it is not deployed, or perceived as deployable, to the Indo-Pacific. Observing US naval operations under stress in the Gulf in real time is, for Chinese military planners, intelligence of high value for any future scenario involving Taiwan. Also, the US blockade of Iranian ports since 13 April directly constrains Chinese crude imports. That may not be a coincidence; it might just be a feature of American strategy. The trade confrontation between Washington and Beijing may have effectively acquired a covert energy dimension — not through tariffs but through strategic denial.
Taking a broader perspective, so far, Russia is the immediate winner — its Q1 exports are up, its prices are up, and its geopolitical narrative of ‘the West’s adventurism has been handed to it on a plate. India has continued buying Russian crude under a US-granted exception.
The Potential for A Summer Denouement
The Russia–Ukraine war may be closer to a negotiated settlement than at any point since the Istanbul communiqué of April 2022. Trilateral talks in Abu Dhabi in early February produced what Trump’s envoys Steve Witkoff and Jared Kushner described as substantial progress on a military monitoring protocol and a ‘prosperity agreement’. A 28-point US-Russia draft surfaced in November 2025 that European observers called openly pro-Russian; a counter from European capitals ran to 24 points; what is now in circulation is a 19-point hybrid drafted between US and Ukrainian teams. A June 2026 deadline has been set. The administration has signalled it intends to drive the parties to that calendar whether or not the substance is resolved.
Four forces are converging on that window. The Middle East crisis has strengthened Russia’s hand materially — Q1 oil exports are up, 90% of Russian crude now flows to China and India, and the precedent of US sanctions relief on Venezuela has given Moscow a working template for its own normalisation. Europe’s energy security crisis has absorbed the fiscal and political bandwidth that would otherwise have gone to Ukrainian military support — Germany cannot fund another multi billion Euro aid package, France is unlikely to be able to agree one, and industrial subsidy budgets are being consumed by gas-storage refill at a premium. Ukraine’s own grid and generation base have been systematically degraded by winter drone strikes. And the Trump administration’s calendar runs to the November midterm elections, against which a peace deal concluded by the summer — however ugly — frames Iran and Ukraine as concurrent strategic victories, redirects American strategic bandwidth away from Europe toward the Indo-Pacific, and opens commercial ground for US companies to enter post-sanctions Russian and Ukrainian resource extraction on the Venezuela template.
A settlement may be one that makes everyone hold their nose. Territorial concessions formalising the occupation of Donbas and Crimea. Security guarantees for Ukraine that are weaker than Kyiv wants and worse than those that NATO has previously offered. Sanctions relief on Russia that European governments may publicly oppose and yet privately accept. Little or no serious accountability for war crimes. Ukraine outside NATO, formally non-nuclear, subject to limits on military reconstitution. A gradual return of Russia to normal diplomatic circulation — a G8 seat restored, SWIFT access for non-sanctioned banks, negotiated release of frozen assets.
This is not what Ukrainians fought for or what Europeans voted for. But it protects US interests on axes that matter to the current administration — a freed Pacific hand, an energy export franchise, a China-leverage reset, and a midterm electoral story that runs from February’s strikes through to a summer signing ceremony. The Iran crisis may have materially increased the probability that such a settlement happens. The Middle East may, in some ways, have mortgaged Europe’s Ukraine position.
Europe entered the last four years focussed on the thinking that its principal geopolitical vulnerability was its dependence on Russian gas. But the more structural vulnerability is its dependence on imported energy — full stop. Russian gas was, partly, replaced by Qatari LNG; Qatari LNG has been disrupted by an Iran war that Europe neither wanted nor sanctioned. The settlement that ends the Ukraine war may be concluded on terms partly set by the Iran crisis. The vulnerability is not a supplier. The vulnerability is the import itself.
The Cover Came Off
The central argument of The Edge is that geopolitical conflicts are substantially driven by competition for energy resources, and that climate change and resource conflict are not parallel problems to be solved separately — they share root causes.
In the past, the energy dimension behind geopolitical conflicts has been hidden. Now, the Trump administration brings it into plain sight.
On 3 January, US forces captured Nicolás Maduro. The Trump administration has actively encouraged American companies to re-enter Venezuela with a targeted $100 billion investment programme focused on the largest proven oil reserves in the world. The administration framed the intervention as a move to deny Chinese access to Venezuelan crude and infrastructure. On 4 January, the President publicly re-stated the case for US control over Greenland on resource and security grounds — rare earths, the F-35 supply chain, and Arctic shipping lanes. The prediction market probability of US control over some part of Greenland has doubled since mid-2025. The bombing campaign in Iran targeted, among many other things, the entirety of Iran’s energy export infrastructure — Kharg Island, Asaluyeh, the Mobarakeh steel complex, Khondab heavy water, and refineries in Tehran.
Venezuelan oil, Greenland rare earths, Iranian crude, Qatari LNG, Ukrainian and Donbas gas fields are not separate stories. They are the same story told at different latitudes.
The United States has blown open the cover argument of The Edge. Competition for resources causes conflict. Climate change, driven by the extraction of those resources, is happening in parallel and mutually reinforcing ways. The solutions are the same: less reliance on contested resources means less exposure to the conflicts fought over them and less carbon emitted. More efficiency means less resources demanded, less imported, less competed for, less burned.
The Forcing Function
The United States is a shock exporter. It can tend to treat the rest of the global energy system as an instrument of American policy because the rest of the global energy system is not, for the United States, a vulnerability.
The United Kingdom is not in this position. Nor are Germany, France, Spain, Japan or Korea. China is closer than most — 85% energy self-sufficient officially, its oil import exposure limited to about 18% of its energy mix. But China is not immune either, as the last six weeks have demonstrated. And the countries that are most exposed — Pakistan, Bangladesh, Egypt, the horn of Africa, and much of sub-Saharan Africa — have no absorptive capacity at all.
This is the forcing function. For the first time since 2022, and more completely than in 2022, the world has a concrete, visible demonstration of what happens to an economy that imports most of its energy when the sources of that energy become the battleground of great-power contest. The UK, the EU, Japan, Korea, China, India, and dozens of smaller states have been handed the evidence. The question is what they do with it.
The answer cannot just be more pipelines from friendlier countries. That is a dependency trade, not a dependency exit. Every LNG terminal built in 2023 to replace Russian gas is a liability in the face of any future disruption in the Middle East or even the United States. The answer cannot be more strategic reserves alone. Reserves buffer a shock; they do not end it. The answer cannot only be more renewables deployed at utility scale and delivered across vulnerable transmission grids. This is necessary but insufficient, and quite often undermined by the same grid and interconnector fragilities that the current system already suffers from.
The answer — the structural, durable, commercially sensible answer — must include EDGE infrastructure. Efficient, Decentralised Generation of Energy. Deployed at or close to the point of use. On-site renewables and storage, combined heat and power, heat recovery, waste gas recycling, controls. The technologies are proven, commercial, and deployed at scale today by companies including ours across more than 50,000 sites globally. They do not depend on a single pipeline from Siberia, a single route through or around Ukraine, a single strait in the Gulf, or a single undersea cable to a neighbour. They eliminate transmission losses, compressing the distance between where energy is made and where it is used to something approaching zero. They insulate the owner — a hospital, a factory, a data centre, a university, a municipality — from the price volatility that Hormuz disruption creates.
Critically, they address the largest single dirty secret of the global energy system – that most of primary energy is lost before it reaches the point of use. In the United States, less than 40% of primary energy does work. Half of global primary energy is wasted in generation alone. The IEA has calculated that doubling the rate of energy efficiency improvement would deliver roughly half of the cumulative greenhouse gas reduction required by 2030.
Every unit of energy not wasted is more than two units not imported, not competed for, not fought over, and not emitted. Efficiency is the fastest route to emissions reduction, the cheapest route to energy security, and the structural answer to geopolitical price shock all at once. That is not an ideological claim. It is the commercial logic of the sector.
I am not going to argue that EDGE infrastructure prevents wars. It does not. What EDGE infrastructure does is change the transmission mechanism. It reduces the degree to which geopolitical shocks become domestic crises. It lowers the cost of exposure. It shortens the fuse between a missile strike in the Gulf and an energy bill arriving in Grantham.
Sun Tzu, as I have referenced before in this series of Substacks, observed that the supreme art of war is to subdue the enemy without fighting. The modern corollary, for nations that import their energy, is that the supreme art of resilience is not to need what your adversary controls.
The forcing function is on the table. The tools to respond to it exist and they are already commercial. The key question is whether, this time, we use them.
The key choice is what we build between now and next time.
Jonathan Maxwell is the CEO of Sustainable Development Capital LLP and author of The Edge. He writes about energy, climate, finance, and geopolitics.
Views expressed are personal and do not constitute investment advice.
To learn more about energy efficiency, visit the website of SEIT plc, or SDCL Group.