Oil Transition Crisis: Global Instability Threat Grows

Conflict, migration, and economic upheaval will accompany the global move away from oil unless governments act urgently to help the worst afflicted countries cope, according to new research published by the E3G thinktank. The study, compiled over two years through “war-gaming” scenarios with more than 100 public servants and experts worldwide, reveals that countries heavily dependent on oil revenues face catastrophic consequences as demand plateaus in the coming decade.

Nigeria, Iran, Angola, and Algeria emerge among the most vulnerable nations. These countries rely strongly on oil revenues for their government operations and provision of public services but have little diversification and insufficient capital to cushion the impending economic blow. The research warns that producer fragility becomes a global security risk when oil-dependent nations are left to adjust on their own.

Oil use has already begun waning in many countries with the growth of renewable energy. The decline has accelerated dramatically following the effects of the Iran war, which constrained supply and sent prices soaring, triggering high inflation and political instability across multiple regions. The conflict has fundamentally reshaped global energy calculations, forcing policymakers to confront transition challenges far sooner than anticipated.

Demand Plateau Forces Producers Into Zero-Sum Competition

Global demand for oil is forecast to plateau in the coming decade, with a peak likely in the early 2030s. This timeline will force producers to chase a shrinking pool of buyers in an increasingly competitive market. Many governments will try to hang on to their resource revenues as long as possible, according to the E3G research, but the cheapest producers with abundant resources are positioned to dominate.

Saudi Arabia and the United Arab Emirates are likely to win market share against competitors with less advanced infrastructure. Their production cost advantages and established extraction capabilities give them decisive leverage as the industry contracts. Countries without similar advantages face the prospect of watching their primary revenue source evaporate while lacking alternative economic foundations.

The example of Venezuela serves as a stark warning. The country suffered collapse and experienced a partial takeover of government by the US, conditions now shattered further by the impact of earthquakes. The Venezuelan case demonstrates what happens when oil-dependent economies fail to prepare for transition, according to the report’s authors.

Governments Unprepared For Transition Consequences

“Governments are not thinking about and not prepared for [these outcomes],” said Beth Walker, co-author of the report. She emphasized that inadequate planning creates cascading risks far beyond the directly affected nations. The transition becomes riskier for everyone when oil producers are left to adjust independently and oil markets are left to manage themselves without coordinated international support.

Despite the severe risks, delaying or slowing the transition represents an even worse option than confronting it directly. The climate crisis continues rapidly worsening, creating its own set of catastrophic consequences that compound economic vulnerabilities. Attempting to preserve the status quo merely postpones inevitable disruption while allowing environmental damage to accumulate.

“None of this is an argument for slowing the transition,” said Maria Pastukhova, a co-author of the report. “A slow but chaotic transition can be just as destabilising as a fast one, maybe even more so.” Her analysis underscores that the pace of transition matters less than whether governments implement coordinated strategies to manage economic disruption and support affected populations.

Iran Conflict Reshapes Energy Security Calculations

On the morning of 28 February 2026, US and Israeli forces launched a large-scale attack across Iran. The initial strikes killed Ayatollah Ali Khamenei and other senior members of the Iranian leadership, fundamentally altering Middle Eastern geopolitics. Iran has responded by striking US bases across the region and targeting American allies, creating substantial risks of escalation into a wider regional conflict.

The European Union Institute for Security Studies published analysis examining the implications of the war across the world and options for EU policymakers. Director Steven Everts outlined three concrete options for Europe to actively shape the war, protect its interests, and prevent further escalation. The commentary considers effects on the oil market alongside regional security dynamics.

Europe’s response has been marked by shock, scepticism, a certain inward focus, and above all, a retreat into debates about principles. Europeans were not consulted at the outset and are not directly taking part in the offensive military operations, leaving the continent on the sidelines of decisions that directly affect its energy security.

European Interests At Stake Despite Limited Role

This conflict represents a completely different scenario from Afghanistan or Iraq, or even from last summer’s strikes on Iran’s nuclear facilities. In all those previous cases, some European countries were involved, including to protect Israeli airspace. The current war, however, proceeds with Europe’s role more limited despite the continent’s substantial interests at stake.

Regional stability, energy security, and credibility as supporters of democracy all hang in the balance for European nations. The continent must be careful not to get stuck in mere moral outrage and predictions about outcomes while failing to take concrete action. While the future remains uncertain, the pressing question centers on what the EU will do to protect its interests and shape events rather than simply react to decisions made elsewhere.

Bob Ward, policy director at the Grantham Research Institute at the London School of Economics, who was not involved in the E3G report, noted that developed countries would also face significant effects from the transition. Many oil producers have been in denial about the pace and scale of demand changes, leaving themselves vulnerable to rapid economic deterioration when market conditions shift decisively away from fossil fuels.