Global economy faces "major threat," multiple countries' livelihoods severely impacted, world emergency response to "worst energy crisis"

Why Will the Middle East Conflict Escalation Trigger Global Market Turmoil?

【Global Times Special Correspondent in the U.S. Xiao Da and Wang Yi】On the 23rd, International Energy Agency (IEA) Director Fatih Birol warned: “The escalation of conflict in the Middle East is plunging the world into the most severe energy crisis in decades.” Due to the geopolitical conflict in the Middle East and disruptions in shipping through the Strait of Hormuz, global energy markets are experiencing intense volatility, with soaring energy prices and shortages severely impacting global transportation and manufacturing. Ordinary households in many countries are facing fuel crises, and global food production is under serious threat. In response, many nations have taken emergency measures. However, many analysts believe that as the geopolitical conflict continues, the global economy may fall into stagflation, and supply chains could face prolonged difficulties. This crisis may become long-term, and countries must prepare accordingly.

Residents of New Delhi queue to refill liquefied petroleum gas. (Visual China)

Global Energy Situation “Very Severe”

According to Australia’s ABC on the 23rd, IEA Director Birol warned during a speech at the Australian National Press Club that the current global energy situation is “very severe,” with the crisis’s impact comparable to “two major oil crises in the 1970s combined with the energy crisis triggered by the Russia-Ukraine conflict in 2022.” Birol stated that the only real solution to energy supply disruptions is to reopen the Strait of Hormuz. However, “even if peace is achieved in the Middle East now, the global energy predicament will persist for a considerable time due to extensive damage to energy infrastructure during the conflict.” He emphasized that the global economy faces “significant threats,” and “if the crisis continues in this direction, no country will be immune, so a global effort is needed to address it.”

On the 23rd, CNBC reported that international oil prices fluctuated sharply that day. Although U.S. President Trump claimed that the U.S. and Iran had engaged in dialogue, investors remain concerned that the situation could escalate further. Goldman Sachs, a globally renowned investment bank, raised its oil price forecast for April, expecting Brent crude to average $110 per barrel, up from the previous forecast of $98, and a 62% increase over the 2025 annual average. Goldman predicts that if the Strait of Hormuz remains in its current state, Brent crude could soon surpass the historical high of about $147 per barrel.

According to UN data, over 60% of global transportation relies on oil, and about 30% of industrial manufacturing uses oil-based raw materials such as plastics, fibers, and lubricants. Additionally, natural gas is mainly used for power generation, heating, and industrial fuel, and is also a key raw material for chemicals like ammonia and methanol. Globally, billions of people depend on natural gas or liquefied petroleum gas (LPG) for cooking and heating. Energy shortages will directly threaten people’s livelihoods, survival, and social stability.

The U.S. News & World Report states that the worsening Middle East conflict has threatened global food supplies. About 70% of global synthetic ammonia (the base for producing urea and other nitrogen fertilizers) is made from natural gas. Currently, many fertilizer plants in India are forced to shut down or reduce production, which could severely impact the country’s food production and exports. FAO Chief Economist Torero expressed concern that global food supplies will be seriously disrupted. He said that about half of the world’s food production relies on fertilizers, so “food supplies worldwide will decrease—including staple foods, feed, and the global supply of dairy and meat products.”

Severe Impact on Livelihoods in Many Countries

According to Reuters, the world is facing “the most severe threat to global energy security in history,” with the IEA issuing 10 recommendations: work remotely whenever possible; reduce highway speed limits; encourage public transportation; avoid flying when possible.

The Wall Street Journal reports that many governments are taking emergency measures, from implementing four-day workweeks to banning air conditioning. For example, Thailand has suspended overseas travel for civil servants and urged them to take stairs instead of elevators; Bangladesh has closed universities; Sri Lanka has adopted a four-day workweek and implemented fuel rationing.

Reuters states that several European governments are taking strict measures to curb rapid oil price increases: Germany has banned gas stations from raising prices more than once a day; France announced heavy penalties for price gouging.

South Asia is one of the regions most affected by this energy crisis. The Hindustan Times reports that due to disrupted natural gas supplies caused by Middle Eastern conflicts, India—its third-largest car market—is preparing for assembly line disruptions. Indian automakers and parts suppliers are bracing for potential shutdowns. For Indian households, the concern is not only soaring LPG prices but also increasing scarcity. In many cities, residents queue for hours outside LPG distribution centers, with some arriving at dawn. Many restaurants have closed or switched to alternative fuels like charcoal and firewood due to inability to buy cooking gas.

In Pakistan, the government raised gasoline prices by 60% and closed schools. Bloomberg reported on the 23rd that Pakistan’s popular cricket league organizers announced that, to conserve energy, the league would switch to online viewing, with all matches held in Lahore and Karachi, after negotiations with the government.

Russia’s Sputnik News reports that amid the energy crisis, Pakistan may avoid the worst-case scenario by importing solar panels from China. Since 2018, Pakistan has expanded solar energy use, saving over $12 billion in oil and gas imports, and expects to save an additional $6.3 billion by the end of 2026. The country’s solar capacity has grown from less than 1 GW in 2018 to over 51 GW by 2026, making solar the second-largest power source.

“The World Is in a Nightmare”

El País of Spain on the 23rd states that although the Israel-Hamas conflict has lasted only three weeks, the world has never been closer to an energy shutdown. The latest report from Kpler, an energy policy analysis firm, warns that even if the conflict ends now, the global energy crisis will persist because it takes months to restart shut-down or damaged oil and gas fields and production facilities. This means energy prices will remain high for a long time, and shortages could last until 2027—“the greatest threat has only just begun.”

Fortune magazine reports that, following trade wars, the Trump administration’s conflict with Iran is creating another crisis for the global economy. The conflict has driven up energy and fertilizer prices, threatened food security in poor countries, and destabilized fragile states. There is no clear end date in sight, and signs indicate the conflict could last longer. Maurice Obstfeld, senior fellow at the Peterson Institute for International Economics and former chief economist at the IMF, said: “The world is in a nightmare.”