Apr 17, 2026
The ongoing war in Iran is sending shockwaves through global energy markets (1), as disruptions in the Strait of Hormuz — a route responsible for about 20% of the world's oil (2) — threatens supply.
Iran has now reportedly (3) opened the strait to commercial vessels, though the situation remains in flux. President Trump said the U.S. blockade on Iranian ships and ports will stay "in full force" (4) until Tehran reaches a deal with Washington.
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According to Nobel Prize-winning economist Paul Krugman (5), that dynamic could ultimately benefit China most, given its dominance in clean energy technologies.
"The big geopolitical winner from Trump's hostility to the energy revolution will be China, which dominates the production of renewable-energy infrastructure," Krugman wrote on his substack (6). "Furthermore, the China-led energy future will arrive ahead of schedule thanks to the debacle in Iran."
Oil shock is accelerating the clean energy shift
Oil prices are climbing as the national average for gas recently hit about $4.10 a gallon, according to AAA (7), and could rise further if supply constraints persist. Markets reacted quickly, with Brent crude jumping about 7% to just over $101 a barrel (8), while U.S. crude rose to around $103.
The blockade followed stalled talks between the U.S. and Iran (9). For Krugman, the price spike is doing more than squeezing consumers, it's reinforcing how vulnerable fossil fuel markets can be and accelerating interest in alternatives like solar, wind and battery storage.
Some analysts caution the shift may be uneven. While geopolitical shocks can boost interest in renewables, existing oversupply in solar manufacturing (10) could limit how quickly demand translates into growth, with industry capacity already exceeding global demand. At the same time, the U.S. is expanding domestic battery production (11) but still relies heavily on Chinese supply chains, particularly for battery cells.
China is already well positioned to benefit from that shift. It controls more than 80% of global solar manufacturing (12) and accounted for about 60% of global EV battery demand in 2024, according to the International Energy Agency (13). China's advantage goes beyond manufacturing. By rapidly expanding its own use of clean energy, the country is building experience and supply networks that could make its lead difficult for other nations to match, according to Krugman.
While the U.S. has ramped up investment committing more than $40 billion to solar manufacturing (14) since 2022, it still trails China's scale and production capacity.
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Why the U.S. could fall behind
The White House has emphasized an "energy dominance" (15) strategy focused on expanding domestic oil and gas production, even as policy changes including tariffs on imported clean energy components have added friction to the growth of renewables in the U.S. Some forecasts suggest solar installations could fall up to 27% below earlier expectations (16).
Krugman said that divergence is a key concern. He argues China is already pulling ahead, not just because it manufactures clean energy technology, but because it is rapidly adopting it at home giving its companies an edge in experience, scale and global competitiveness.
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Trump has repeatedly said he wants the U.S. to outcompete China (17) as the world's leading economic power. But the ripple effects of the Iran conflict could push the global economy in the opposite direction.
The future ahead
As countries move to reduce their reliance on volatile oil markets, many are accelerating investments in clean energy. That could give China a stronger foothold not just in energy production, but in the industries expected to drive future economic growth.
That includes manufacturing jobs, supply chains and the broader economic influence tied to them – areas that have historically been key drivers of long-term prosperity.
Krugman warns that if the U.S. falls behind in the transition, the consequences could be difficult to reverse. "By the time America frees itself from Trump's fossil fuel obsession, if it ever does, China's lead in the manufacture of renewables will probably be insurmountable," he added (6).
For consumers, the effects are already starting to show up. Higher oil prices can quickly translate into more expensive gasoline, but the impact doesn't stop there. Rising fuel costs can also push up shipping and home energy expenses, feeding into the price of everyday goods over time.
If disruptions persist, the ripple effects could extend further, lifting inflation (18) and slowing consumer spending, while making it harder for central banks to cut interest rates (19). Some of those pressures may take time to reach households: food prices (20), for example, often rise later as higher energy costs filter through transportation and production systems.
The fallout from the conflict isn't just about oil, it could help determine which countries lead the next phase of the global economy, and how much consumers ultimately pay to live in it.
Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
BBC (1),(2); The Guardian (3); Truth Social (4); Business Insider (5),(8),(17),(20); Paul Krugman's Substack (6); AAA (7); CNN (9); Reuters (10); OilPrice (11); International Energy Agency (12),(13); American Clean Power Association (14); The White House (15); Astute People (16); Morgan Stanley (18); Euronews (19)
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Victoria Vesovski is a Toronto-based Staff Reporter at Moneywise, where she covers the intersection of personal finance, lifestyle and trending news. She holds an Honours Bachelor of Arts from the University of Toronto, a postgraduate certificate in Publishing from Toronto Metropolitan University and a Master’s degree in American Journalism from New York University’s Arthur L. Carter Journalism Institute. Her work has been featured in publications including Apple News, Yahoo Finance, MSN Money, Her Campus Media and The Click.
