The Iran crisis is reshaping how the world produces, uses and secures energy. This is no temporary shock. It has become a structural stress test of energy systems, industrial production and government strategy.
We’ve seen this in the recent past: household energy bills in 2024 were still about 4% higher than in 2019,
even after the 2022 global energy crisis had eased (annual bills were up 16% at the peak). That crisis was driven by a combination of post-pandemic demand recovery, tight energy supplies and wider geopolitical disruption, including the Ukraine war, which pushed energy prices sharply higher.
Affordability remains fragile because many lower-income households still spend a disproportionately large share of their income on energy. It’s also a problem for business. Sustained energy costs continue to burden European manufacturing, for instance, affecting industrial competitiveness and long-term economic resilience.
At the same time, the International Energy Agency (IEA) projects global electricity demand will have grown 3.3% in 2025 and then 3.7% in 2026. The pressure from the 2022 crisis therefore shifted rather than disappeared.
International fuel markets remain highly sensitive to geopolitical shocks, especially when households and industry depend on imported gas and oil. Around 20% of the world’s oil passes through the Strait of Hormuz. This highlights how concentrated supply routes can transmit instability rapidly across global markets, causing not just rising energy prices but knock-on effects like increased fertiliser costs.
JessicaGirvan/Shutterstock
It’s also no longer just a question of fuel supply. Unpredictable, extreme weather conditions are compounding the problem of volatile prices of fossil fuels. Heatwaves raise electricity demand for cooling; drought weakens hydropower; storms disrupt transmission and distribution infrastructure; and low-wind periods test whether the system has enough backup power, storage and flexibility to maintain supply.
The IEA’s work on climate resilience in power systems makes clear that climate-related extremes are becoming more important across electricity generation, networks and demand. Price risk and weather risk are increasingly overlapping drivers of modern energy insecurity (the risk of energy becoming unaffordable, unreliable or unavailable).
The strain is emerging from a mismatch between how energy systems were built and the conditions under which they now operate. Electricity systems are being asked to integrate larger amounts of low-carbon power, but the supporting infrastructure has not developed at the same speed. This means there is still not enough grid capacity, energy storage, system interconnection or ability to match electricity demand with changing supply to move electricity efficiently, store surplus power or reduce pressure at times of peak demand.
At least 1,650GW of renewable electricity capacity worldwide is waiting in grid connection queues. That is equivalent to more than 40 times Britain’s recent peak electricity demand of about 38GW, which shows how large the backlog has become.
An estimated US$400 billion (£296 billion) is spent annually on grid infrastructure, including transmission lines, substations and distribution networks that carry electricity from where it is generated to where it is used.
This compares with roughly US$1 trillion spent on forms of energy generation, such as solar farms, wind farms, hydropower plants and gas-fired power stations. This shows how electricity-generating capacity has expanded faster than the systems needed to connect it, balance supply and demand, and keep the system secure.
When electricity demand is rising rapidly, there’s less of a buffer if the supporting infrastructure needed to manage it (such as grids or storage) is not expanding at the same pace.
Missed warning signs
Well before the Iran energy crisis, it was clear that we are overly dependent on internationally traded fossil fuels. The same goes for the slow pace of grid expansion relative to new generation capacity, and our failure to treat weather variability as a core energy-security issue rather than a secondary climate concern.
Recent European electricity data underlines this. Wind and solar generated 30% of EU electricity in 2025, slightly above the 29% from fossil fuels. Nevertheless, less windy and less rainy conditions contributed to a 12% fall in EU hydro output in 2025.
Cleaner systems do not automatically become more resilient. Network strength, flexibility and climate preparedness all need to advance at the same pace.
The strongest evidence points towards a more integrated response in which energy security and decarbonisation are treated as part of the same agenda. Lowering dependence on volatile fossil fuels, using energy more efficiently in homes, transport and industry, and strengthening system flexibility are increasingly central to long-term security. Yet many electricity systems remain too slow to adapt when supply drops, demand surges, or electricity must be shifted across regions or time periods.
fokke baarssen/Shutterstock
You can see the implications with households. Heat pumps are typically three to four times more efficient than gas boilers in the sense that they can deliver three to four units of heat for each unit of electricity used, because they move heat rather than generate it directly.
However, the Climate Change Committee also notes that lower running costs depend on electricity prices and policy support, so greater efficiency does not always mean lower bills in the short term. Solar panels can help here. The UK government’s solar roadmap says a typical household installing rooftop solar could save around £500 per year on bills. Meanwhile, the IEA also estimates that electric vehicles displaced more than 1.3 million barrels of oil demand per day in 2024.
These are not only indicators of decarbonisation; they also show how cleaner technologies can reduce direct exposure to fossil-fuel price volatility.
At the policy level, the choice is between deeper structural resilience and repeated cycles of short-term crisis management. The European Commission’s REPowerEU plan is to make Europe’s energy system more secure, affordable and sustainable by reducing dependence on imported fossil fuels, accelerating clean energy and improving energy efficiency. It is intended to strengthen long-term energy resilience across the EU by diversifying energy supplies and speeding up the transition to domestically produced low-carbon energy.
What remains uncertain is the timing and scale of future shocks. What is certain is that the greatest vulnerabilities still lie in fossil-fuel dependence, weak infrastructure and delayed policy adjustment. The most credible route to a more secure energy future lies in efficiency, electrification, renewables, stronger grids, storage and policy that takes a longer-term approach.
