Three months of Hormuz closure have accelerated a redrawing of global energy maps and actors. Germany signed a 20-year agreement to buy up to 1 mt of LNG from Canada’s future C$10 billion facility in British Columbia backed by Blackstone. The deal is a direct diversification play: 94% of Germany’s LNG currently comes from the US, and its chancellor had been courting Middle Eastern suppliers before the war exposed the fragility of Gulf flows.

Non-Gulf producers are cashing in. Argentina’s crude exports hit a record 9.89 million barrels in May, more than doubling since February, with 7.21 million barrels shipped to Asia in three months. Brunei’s oil exports rose 51% year-on-year. Oman’s refined product exports reached record highs.

The IEA’s World Energy Investment report shows the capital following: natural gas spending is hitting a 10-year high at $330 billion, upstream investment in Africa, Central and South America will jump more than 10%, while Middle East oil and gas spending will decline 1%.

On the demand side, China’s structural oil decline is laid bare. Crude imports could fall to 10.9 million barrels per day, the weakest since 2022. Transport is increasingly electric, refining capacity exceeds demand, and seaborne crude imports have collapsed to 6.5 million barrels per day, the lowest since 2016. In Mozambique, a $2 billion cost dispute between the government and TotalEnergies over the project stoppage threatens to further delay a facility viewed as vital to the country’s ambitions as a strategic alternative LNG supplier, with first exports not expected until 2029.

The damage from Hormuz has penetrated the material economy far beyond energy. Half the world’s sulphur trade passed through the strait before the war. Sulphur prices have surged from $150–180 per tonne to $850–900, with some delivered prices approaching $1,000. The phosphate market was already constrained before the war by rising sulphur demand from battery metals processing; the Hormuz closure has turned a tight market into a crisis. The market is splitting along income lines. Wealthier countries can still secure supplies; farmers in Sub-Saharan Africa and Southeast Asia are already reducing how much phosphate they apply. Harvests could be hit as early as next year. Some regions face risk of potential famine.

In Firozabad, India’s “city of glass,” gas supply cuts have knocked output by an average of 30%. Factories that should now be making Halloween and Christmas ornaments for US export are going cold. Some producers have switched to LPG cooking cylinders, whose prices have also jumped 50%. Across India, 26% of the country’s 30 million-plus small manufacturers are described as being on life support. The UN Development Programme has warned the conflict could push 2.5 million Indians into poverty.

European wind manufacturers are adding a protectionist layer. Nordex’s CEO called for all non-western turbine makers to be blocked from new wind capacity connecting to European grids, framing the issue as supply chain independence and technology sovereignty. European companies still control over 90% of the regional market, but fear a repeat of the solar panel collapse that left Europe dependent on Chinese imports.

The EU will ask member countries to waive penalties for three years for oil and gas companies that breach its methane emissions law, responding to pressure from the US government and industry groups who warned the rules could hamper fuel supply security. The waiver applies to existing contracts and those signed before January 2028. Environmental campaigners say it reduces the world-first legislation to a “paper tiger.”

In Washington, the SEC proposed rescinding its climate risk disclosure rule entirely, calling it a “dramatic overreach.” The rule, adopted in 2024, required virtually all public companies to report on direct emissions. It never took effect after lawsuits from Republican-led states. Companies operating in California and the EU may still face separate disclosure requirements. The EU is also considering extending its emissions trading system to flights departing the bloc, exposing major carriers to significant additional costs: €1.8 billion for Lufthansa, €1.7 billion for IAG, and €1.5 billion for Air France-KLM in 2027, according to projections at a carbon price of €120 per tonne.

The Bundesbank’s first deputy governor published an opinion piece in the FT, calling for urgent policy clarity on the transition and echoing the previously made argument that fossil fuel dependence is “not merely an environmental liability” but “an economic and strategic vulnerability.” The pace of transition is outrunning political narratives, she wrote: investment in renewables outpaced fossil fuels five to one last year, global EV sales rose more than 20%, and the cost of solar has fallen more than 99% since 1979. Spain is cited as a role model, with rapid renewables deployment reducing the bad influence of gas on electricity prices. Caution about competitiveness, the argument goes, should not become a pretext for obstructing faster progress.

Evidence from the week supports both sides. A European heat wave broke May temperature records. At peak, solar met nearly half of UK electricity demand, the highest on record, pushing French hourly power prices below zero. But the UK’s biggest utility, SSE, announced it is unlikely to meet its 2030 renewable energy target, citing grid connection delays, policy uncertainty, and local opposition. It took £156 million in charges on delayed Scottish wind farms. Grid capacity is emerging as one of the biggest obstacles to the transition; the ambition exists, but the physical infrastructure to deliver it does not.

South Africa is extending coal plants that generate 80% of its electricity after gas replacement projects stalled. A government adviser noted that with wars ongoing, coal plants cannot be shut down. A coal supply contract signed recently runs to 2043 for a plant commissioned in 1979. Meanwhile, Eni and Seri Industrial signed an agreement to develop a lithium iron phosphate battery supply chain in Italy, targeting more than 10% of the European stationary battery market with a gigafactory producing over 8 GWh per year by 2029.

And Exxon’s world’s largest carbon capture and storage business on the US Gulf Coast is facing opposition. The company is developing a $5 billion-plus pipeline network across Texas, Louisiana and Mississippi, but depends on climate regulations, carbon tariffs and subsidies the oil industry once fiercely opposed. But in Louisiana, the leading US hub for CCS, a Republican state treasurer and Senate candidate has called it “experimental technology” reliant on taxpayer subsidies that tramples property rights. Environmental groups label it a Trojan horse to justify continued extraction, noting that most CO₂ collected by Exxon is currently used for enhanced oil recovery. The backlash threatens $75 billion in proposed capital spending.

The environmental impact of transition supply chains are drawing scrutiny from another direction. BHP, the world’s biggest miner, delayed and downgraded plans to switch to electric vehicles at its Pilbara iron ore mines, purchasing 62 diesel trucks. BHP’s Australian operations consume 1.5 billion litres of diesel per year. In Madagascar, more than 6,000 people are in dispute with Rio Tinto over alleged contamination from rare earth mineral extraction. In Myanmar, chemicals are injected into mountainsides to leach rare earths from clays. Insufficient alternatives to Chinese and Myanmar production mean many buyers are not scrutinising how materials are produced. These are the minerals that go into EVs, wind turbines and defence systems.

Across Asia, temperatures have climbed well above long-term averages weeks ahead of the usual summer peak. Seoul readings are 13% above normal; Shanghai 12%; Tokyo 10%. Several Indian towns have recorded temperatures above 40°C. The heat is driving widespread air conditioner use across a region where the share of dwellings with cooling systems is expected to jump from 36% to 60% by 2050. Over 60% of utility-supplied electricity in Asia comes from coal and gas plants. Authorities in Vietnam, the Philippines and India have issued power output warnings.

With the gas crisis now coming more in focus, LNG prices could rise a further 50% through August if the strait remains largely closed, as summer demand collides with constrained supply. Chinese LNG imports, which slumped after the war began, are recovering; Japan faces a blistering summer forecast with spot electricity prices near 2022 highs. The IEA notes that coal investment will reach a 14-year high at $180 billion, and some Asian countries may keep existing coal plants operating longer to bolster energy security.