Surge in Solar Demand: How The Iran War Is Reshaping Global Energy Calculations

LONDON/HOUSTON - Three weeks into the war in the Middle East, the Iranian War is redefining global energy markets in ways much larger than just a jump in oil prices. Countries looking for emergency fossil fuel supplies are finding, perhaps more significantly, that there is a taste for solar energy as many homeowners, corporations and policy-makers now see the vulnerability of imports.

While the US and Israel have been bombing Iran since Feb 28, and Iran has blocked the Strait of Hormuz, which is a major route for oil and about 20% of the liquefied natural gas (LNG) that comes out of there, the disruption has caused the world to choke off fuel supplies through this critical artery. The waters of the Strait of Hormuz now represent a "high-risk" area for global energy supplies. The fragility of global supply chains is more apparent now than ever before; and there have been major price increases and major supply interruptions for countries around the world, leading to significant reassessments of energy security for countries from Europe to Asia.

The energy crisis has resulted in consumers changing the way they consume energy. Shortly after the escalation of the conflict in Ukraine, EnergySage, a marketplace of clean energy technologies, has seen a large increase in requests for clean energy solutions. In the first 11 days of conflict, EnergySage saw a 17% increase in quotes from homeowners looking to install solar systems. Specifically, there was also a 23% increase in requests for solar systems with battery backup. Many potential customers were hesitant due to the ending of federal tax credits, but have decided to pursue their energy independence due to fluctuating fuel prices. "The higher that prices go, the bigger the shifts we could see," noted Ethan Zindler, head of country and policy research at BloombergNEF, suggesting that sustained high prices could fundamentally alter consumer thinking about energy strategy.

Many Asian countries have been the most heavily impacted as they are heavily reliant on oil and LNG supplies from the Middle East (e.g. Pakistan, India, Bangladesh, Japan, and the Philippines). A few of these countries are importing more than 90% of their crude oil from the Persian Gulf. The Japan-Korea Marker (JKM), Asia's LNG spot market price, increased by 50% in the first week of March; and it was reported that Bangladesh had purchased a cargo at almost 3x the cost of what would have been paid just one month prior.

This dependency is translating into a macroeconomic threat. Currency depreciation and soaring import bills are draining foreign exchange reserves. The Institute for Energy Economics and Financial Analysis (IEEFA) warns that the risks are most pronounced for emerging Asian economies, which are often the least equipped to mitigate such economic whiplash.

In response, the economic argument for renewables is becoming irrefutable. IEEFA estimates that at current LNG prices, operating a gas-fired power plant is three to four times more expensive than the global average cost of solar and wind . Furthermore, every gigawatt of solar capacity could save an importing country roughly USD 3 billion in LNG costs over 25 years.

In Indonesia, economist Nailul Huda of the Center of Economic and Law Studies (Celios) stated that the war should serve as a catalyst to replace fossil energy, adding that "solar panel technology should play an important role in supplying energy to industries and power plants".

However, analysts caution that the path forward is not a straight line to a green utopia. The crisis has been described as a "Rorschach test" for global energy policy, revealing starkly different responses.

The European Commission (EC), with Ursula von der Leyen at its helm, accepts that scaling back on nuclear is a dumb move and is releasing funding for nuclear projects as well as targets for renewable energy. The dark cloud of Russia's invasion of Ukraine and the huge increase in solar investment in the EU as a response lingers in the background.

On the other hand, the immediate response in many nations has been to scramble for any available domestic source-including coal. Taiwan has considered restarting shuttered coal plants, and countries like Thailand have ordered coal plants to run at full capacity to make up for shortfalls in gas imports . The Trump administration has also seized the moment to pitch American oil and gas as the stable alternative, easing sanctions on Russia to boost global supply and arguing that allies need to invest in fossil fuel infrastructure, not replace it.

In the long run, however, these recent contradictions are likely to result in continued structural growth in the solar industry. Professor David Victor, who studies public policy at UC San Diego, stated that in the short-term, the war has focused everyone on energy security, but at the same time has caused very different reactions in how people will react to the issue. At the same time, the economic fundamentals for solar continue to improve.

Solar resources will also play a key role in the long-term energy plans of a country that has an abundance of fossil fuels like Iran. A recent study done by LUT University concluded that Iran could develop a new type of "Solar-to-X Economy" through inexpensive solar PV generation for not just electricity generation, but also for industrial heat and green hydrogen production, and synthetic fuels, which may be the foundation for redefining Iran's economy beyond the use of oil.

As the renewable energy industry has begun to begin operating in a new environment, there is still some uncertainty as to how the solar industry will be impacted. Increased energy prices will create inflation, which is likely to cause an increase in interest rates, so for a capital intensive renewable energy industry, increased costs of borrowing will increase the costs to install new renewable energy projects. In addition, the solar industry is currently facing very significant challenges in the form of grid congestion, land use constraints and regulatory delays in many parts of the world, especially in places like Europe and India.

Nevertheless, the core lesson of the 2026 Iran war is echoing through finance ministries and living rooms alike: fossil fuel dependence leaves economies vulnerable to geopolitical shocks. "Renewable energy," said UN Climate Chief Simon Stiell, "is the obvious pathway to energy security".

As the conflict continues and energy prices remain volatile, the solar boom appears to be not just an environmental dream, but an increasingly urgent economic necessity.