Prolonged Middle East Supply Disruption Could Reshape Global Energy System: Wood Mackenzie

A prolonged disruption to energy supplies from the Middle East could trigger a major restructuring of the global energy system, reducing dependence on imported oil and gas by half by 2050, according to a new scenario analysis by Wood Mackenzie.

The consultancy said that its conflict scenario, developed as part of the Wood Mackenzie Lens Energy Transition Scenarios, assumes a major geopolitical escalation beginning in early 2026 that disrupts 15–20 per cent of global oil and liquefied natural gas supply.

Under the scenario, global oil demand would fall by around 9 per cent in the near term as supply outages tighten markets. Demand is then expected to recover to pre-crisis levels by 2030 before entering a steeper long-term decline.

By 2050, oil demand would be 20 per cent lower than Wood Mackenzie’s base case, while gas demand would be 10 per cent lower. Countries would increasingly seek to reduce exposure to imported fuels by accelerating electrification and expanding domestic energy sources.

Wood Mackenzie said that the shift would result in a more localised and diversified energy system, with demand increasingly met through electricity, renewables, coal and nuclear power rather than globally traded fossil fuels.

“Geopolitical crises can act as powerful catalysts for long-term system change,” said Prakash Sharma, Vice President, Scenarios and Technologies at Wood Mackenzie. “In this scenario, the world moves decisively towards energy independence, with lasting implications for global fuel demand and trade," he added.

The analysis found that electrification and efficiency would become the main pathways for reducing import dependence. While overall electricity demand would remain broadly unchanged from the base case, lower demand for electrolytic hydrogen would be offset by wider use of electricity in transport, buildings and industry.

The projected energy mix in 2050 differs significantly from Wood Mackenzie’s reference case. Coal demand would rise by 20 per cent as countries maximise domestic energy sources and delay the retirement of existing plants. Nuclear generation would increase by 40 per cent above the base case, supported by both conventional reactors and next-generation technologies from the 2030s onward.

Renewables would continue to expand rapidly and remain the backbone of power systems, while the uptake of hydrogen and carbon capture technologies would slow.

“Energy systems become more local, more diversified and less reliant on complex international trade,” said Jom Madan, Principal Analyst, Scenarios and Technologies at Wood Mackenzie. “Electrification and nuclear take priority, while hydrogen and carbon capture are deprioritised due to cost, efficiency and security considerations," he noted.

The consultancy said that coal would play a larger role in the near term as governments respond to supply shortages by prioritising domestic resources. Over the longer term, however, nuclear power would assume a larger role in providing stable baseload electricity.

Wood Mackenzie also warned that the transition towards greater energy independence would increase system costs. Countries would move away from globally optimised supply chains and rely more heavily on domestic production and diversified sourcing.

“Energy independence reduces exposure to external shocks, but it comes at a structural cost premium.This creates new competitiveness challenges for energy-intensive industries, while advantaging more self-sufficient regions," said Lindsey Entwistle, Principal Analyst, Scenarios and Technologies.

Despite the changes in the energy mix, Wood Mackenzie said that cumulative emissions under the conflict scenario would remain broadly aligned with its base case and would still correspond to a global warming trajectory of around 2.6°C.

The consultancy said that emissions would increase in the short term because of higher coal use, but these would be offset over time through stronger electrification and the expansion of nuclear power.

“The scenario reaches a similar emissions outcome through a different route. It reflects a trade-off between near-term energy security and long-term decarbonisation, with countries ultimately relying on proven, domestically controlled technologies," Sharma said.