BY STEVE RANGER
The short-term consequences of the conflict in the Middle East continue to play out for the global economy. Higher oil prices, concerns about jet fuel stocks and the impact on prices of essential fertiliser commodities like ammonia and sulphur are all feeding into an already fragile global system.
Consumers around the world are now seeing how a conflict in one region can have significant consequences for their daily lives because of the interconnected nature of global trade. If the conflict ends and the Strait of Hormuz opens it will still take months for shipping to return to normal. And it’s also increasingly clear that the Iran war will have longer-term impacts too, particularly for energy usage.
Right now, the conflict is having an impact on climate change simply by curtailing of passage of ships laden with fossil fuels through the Strait of Hormuz. The situation has worsened to the degree of rationing, the release of stockpiles but also the threat of a return to the use of coal, particularly in China and Germany, and even the US, despite its reserves of oil and gas.
How this plays out over the longer term is hard to calculate. It comes, for example, at a time when, after a long time rising at a rapid pace, China’s emissions of greenhouse gas seem to have levelled out, albeit at very high levels.
China’s carbon dioxide emissions dropped 1% in Q4 2025 and possibly 0.3% over the whole of 2025. This kept emissions just below the highs recorded in May 2024 according to the analysis published by Carbon Brief. But China is still responsible for 35% of fossil fuel emissions (somewhere like the UK accounts for less than one percent) and fossil fuel still makes up a large part of its energy supply.
After 20 years of growth China is now by some way the biggest source of fossil CO2 emissions, so what happens there really matters.
But, even as emissions from some of China’s industries decline, its chemical industry has made sharp increases in the consumption of both coal and oil (15% and 10%) with emissions up 12%. That’s likely to grow further as China’s chemical industry continues to expand (indeed, also in 2025 China’s new and reactivated coal power project proposals jumped to a record high, further complicating the picture).
In 2024, the EU economy’s greenhouse gas emissions by economic activities and households totalled 3.3bn t of CO2 equivalents, a 1% decrease compared with 2023, and a 20% reduction compared with 2013.
However, at least some of that decline in emissions is being called out as the result of deindustrialisation, as Europe’s industry – and chemicals in particular – is already struggling with high energy costs and regulation and closing plants. It’s a reminder that behind the headline figures there is often a lot more going on. Reducing emissions through deindustrialisation is not a workable strategy for any country, especially if it means losing out to countries with less stringent regulation.
And, with no immediate end to the Middle East crisis in sight, the potential impact on the global climate is going to take second place to major concerns about the availability of energy supplies around the world, which could change things yet again.
An understandable focus on energy security could drive up emissions in the short term as countries turn to locally-sourced coal over internationally traded oil and gas.
Medium term there will be more emphasis on renewables and nuclear as well, predicts analyst Wood Mackenzie. But it’s also worth remembering that any race for renewables may face its own challenges. Many new energy technologies like batteries rely on lithium, other critical minerals and rare earth elements. The global supply of these also complicated (for more on the lithium supply chain see the last issue of C&I) and governments are increasingly waking up to the risks here too. It’s clear that moves to de-fossilise industry, create energy security, and build industrial resilience and growth are all part of the same challenge.
Beyond simple energy security we are also likely to see a lot more careful thinking by many governments about protecting and reinvigorating the foundational industries – like chemicals – that are at the ground floor of much economic activity. These are under significant pressure right now (see China’s growth adds to European chemicals woes for a look at the pressure on Europe’s chemicals industry).
Just as the current conflict has pushed energy security up the agenda, it is a reminder that the supply chains we all rely on are long, complicated – and fragile. Understanding and supporting local foundational industries and encouraging the build out of local supply chains will generate growth and help insulate economies against global shocks.
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