West Asia conflict can cut global oil demand 20% and gas 10% by 2050: Report

The ongoing war between the US-Israel and Iran in West Asia can fundamentally reshape the global energy landscape, according to a report released by Wood Mackenzie. The sectoral analysis suggested that a sustained geopolitical crisis can act as a powerful catalyst, accelerating a worldwide shift toward energy independence. This can ultimately result in the decrease of global oil demand by 20% and gas demand by 10% by 2050. 

Titled ‘Middle East disruption could cut global oil demand 20% and gas 10% by 2050 as energy security drives shift to independence’, the report published this month examined a scenario where heightened tensions lead to a significant and prolonged interruption of oil and gas supply from one of the world’s most critical energy corridors.

According to Wood Mackenzie’s modeling, such a shock can force oil-importing nations to prioritise domestic energy security over global trade. While global oil demand initially dropped by 9% due to immediate supply outages and price spikes, the long-term impact will be far more structural. By 2050, the forced move away from international energy markets will result in a fifth of global oil demand being permanently removed from the system.

Need for localised grids

According to the report, the volatility in the oil and gas markets can prompt governments to treat energy as a matter of national security, leading to prioritising domestic energy prospects.

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

This shift will significantly favour countries with stable, domestic energy sources. Most countries will fall back upon coal or nuclear, or accelerate electrification of the power grid, according to the report.

In the short term, coal can see a spike of almost 20% as nations will try to plug the energy requirement gap by delaying the retirement of old power plants. Over the longer term, however, nuclear power will take precedence, with capacity expected to rise by 40%. It can provide stable, fuel-secure baseload power as new capacity comes online from the 2030s. 

While renewables and nuclear will thrive, newer technologies like low-carbon hydrogen and Carbon Capture, Utilization, and Storage (CCUS) can face slower adoption. High costs and a lack of established domestic supply chains for these emerging sectors make them less attractive than proven homegrown alternatives in a security-constrained world.

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

Ultimately, Wood Mackenzie’s sectoral analysis outlined that the West Asia conflict is just a temporary market shock, but can force a permanent, more localised restructuring of the world’s power systems.