Oil is once again a powerful tool in geopolitics and the world economy

From the capture of Venezuela’s Nicolás Maduro to war in the Middle East, 2026 has served as a powerful reminder of oil’s enduring influence on geopolitics and the global economy.

Oil has been both a prize, as in the case of Venezuela, and a potent tool of political coercion, as seen in the United States blockade that is depriving Cuba of energy. And now, after oil has surpassed $100 per barrel for the first time in nearly four years, the economic risks of going even briefly without full access to Persian Gulf energy are becoming clearer by the day.

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With oil once again in the spotlight, the sensation is almost like revisiting an earlier time, before countries began to adopt renewable energy and before the United States became the world’s largest producer of oil and natural gas.

There is little sign that war with Iran will cause the kind of economic pain experienced about half a century ago, when oil met nearly half the world’s energy needs and an embargo imposed by members of an oil cartel caused prices to quadruple in a matter of months.

This threw the United States economy into a period of high inflation and stagnant economic growth. Still, it’s clear that running out of as much oil and natural gas as the world is used to consuming, even if briefly, will put pressure on economies around the planet.

“The old game is back more than people thought it would be,” said Elliott Abrams, who served as special representative for Iran and Venezuela during the first Trump administration.

The world remains dependent on reliable supplies of oil and gas, even though two-thirds of global spending in the energy sector now goes to cleaner alternatives such as solar power, which are growing much faster.

Although oil now accounts for a smaller share of global energy needs than in the past — less than 30%, according to the International Energy Agency — the world uses almost twice as much of this fuel as it did in the early 1970s.

And natural gas, used to heat homes and generate electricity, supports a much larger share of the economy than ever before.

“The post-oil world is still a long way off,” said David Sandalow, a fellow at Columbia University’s Center for Global Energy Policy who served in the administrations of Presidents Bill Clinton and Barack Obama. “We are in the early to mid-stages of an energy transition, but energy transitions take time.”

Of course, disruptions like the war with Iran can accelerate the migration to alternative energy sources, especially in places that don’t have easy access to fossil fuels, as well as pressure countries to use energy more efficiently.

America’s fuel efficiency standards are a lasting legacy of the 1973 oil embargo, for example.

The expanding conflict in the Middle East, which began with US and Israeli attacks on Iran on February 28, has all but blocked the Strait of Hormuz, a narrow waterway that serves as the gateway to the market for a fifth of the world’s oil and substantial quantities of natural gas.

Several refineries in the region have closed or reduced processing, some after suffering damage, according to Kpler, a research firm. This means that they are transforming less oil into fuels such as gasoline, diesel and jet fuel.

This interruption — and the fear that it could last for some time — has caused international oil prices to rise by around 37% since the end of February. Fuel prices quickly followed suit, with especially large increases in the cost of diesel and jet fuel.

Qatar, for its part, last week stopped cooling natural gas for export, citing military attacks. This has sent natural gas prices soaring in Europe and Asia, which rely heavily on imported fuel.

The United States, as the world’s largest producer of natural gas, was relatively protected. (The natural gas market is much more regional than the oil market, in large part because the colorless fuel is more difficult to transport.)

Gasoline and diesel prices have been rising at a time when many Americans are already worried about the economy and inflation. Many of these economic concerns can be traced back to the last major energy outage, after Russia invaded Ukraine in 2022.

Gasoline prices, which briefly exceeded $5 per gallon that year, had fallen considerably, to the point where the relatively low cost of filling up served as a counterweight to rising prices elsewhere in the economy — and as a point of pride for President Donald Trump.

War with Iran carries political risk for Trump, not least because of the impact that higher energy prices are likely to have on the U.S. economy.

It’s no coincidence that oil has reemerged as a geopolitical tool and economic threat at a time when the United States is unraveling trade ties and clashing with other major powers, said Meghan O’Sullivan, who was deputy national security adviser for Iraq and Afghanistan under President George W. Bush.

“The energy weapon never went away, but there’s a whole confluence of global conditions — plus individual decisions by the Trump administration and others — that have really brought it back to the forefront,” said O’Sullivan, now a professor at Harvard’s Kennedy School. “Energy can be a foreign policy tool, but it can also be an objective.”

In the Middle East, Iran has resorted to one of its strategic advantages: the ability to disrupt the flow of oil and natural gas through the Persian Gulf and harm economies around the world.

“This will show once again how exposed countries are to energy sources produced outside their borders,” said O’Sullivan.

How countries respond to war in the long term will depend in part on the severity of the economic fallout from higher energy prices.

Reactions also tend to vary by region, leading countries in Asia and Europe that produce little oil or natural gas to adopt renewable energy more quickly.

The United States, flush with oil and natural gas, can continue to exploit these advantages, at least under Trump, even if burning these fuels accelerates climate change.

“For any country that does not have substantial supplies of oil and gas, the obvious conclusion is that investing in renewables plus storage is strategic from an energy security perspective,” said Kelly Sims Gallagher, a former Obama administration official who is now director and professor of energy and environmental policy at the Fletcher School at Tufts University.