War travels through energy
· 7 min read
This article is part of In conversation about sustainable finance & emission reduction systems, a new series by Diego Balverde. You're reading volume one of the Energy Shock
War no longer needs to cross borders to disrupt an economy because the modern system is no longer organized around territory but around flows, and those flows depend on energy infrastructure and continuity; in 2024 global energy demand grew 2.2% electricity demand expanded 4.3% and gas demand increased 2.7% equivalent to more than 115 bcm reaching a historical peak, while global electricity consumption surpassed 30,000 TWh and continues to grow at nearly twice the pace of total energy demand, and more than 80% of global trade by volume still moves by sea which means that over 11 billion tons of goods depend on maritime corridors every year, making the global economy more electrified more interconnected and more exposed to infrastructures that cannot fail without triggering systemic consequences, so the real problem is no longer access to energy but the ability to sustain operational continuity under stress.
The real map of modern conflict is no longer defined by borders but by nodes corridors and infrastructures that sustain economic flows including straits canals LNG terminals refineries interconnections ports and logistics hubs, and this is why a regional war can instantly become a global economic event if it affects the right node, as seen in 2024 when traffic through the Suez Canal which accounts for roughly 10% of global maritime trade and over 20% of container flows representing trillions of dollars annually dropped close to 70% while flows through the Gulf of Aden fell more than 75% and rerouting around the Cape of Good Hope increased nearly 90%, adding between 10 and 15 days to transit times increasing fuel consumption by up to 40% raising insurance costs sometimes above 50% and locking billions of dollars in working capital in transit, while freight rates doubled in several strategic routes during peak disruption periods, demonstrating that disruption today does not only destroy assets but reprices the entire system transforming logistics into inflation delay into cost and infrastructure into economic power, meaning that ports terminals and networks are no longer passive elements but strategic assets that determine which economies absorb shocks and which economies transmit them.
Energy shocks are still interpreted as price spikes but this view is incomplete because price is only the visible signal while the real shock is the transmission mechanism that converts a geopolitical disruption into a systemic economic effect, as shown in March 2026 when global energy prices surged by more than 40% in a single month with European gas rising nearly 60% oil above 40% and electricity markets in some regions experiencing extreme volatility, followed by a 25% increase in fertilizers and subsequent pressure on food prices revealing a clear transmission chain from energy to agriculture to consumption, which is structurally inevitable because gas represents between 70% and 80% of nitrogen fertilizer production costs electricity supports more than 60% of industrial energy consumption in advanced economies and oil still accounts for nearly 30% of global energy supply and more than 90% of transport energy, meaning that when energy becomes volatile the entire cost structure of the economy destabilizes, while electricity demand is growing at almost twice the pace of total energy demand driven by industrial electrification data centers expected to exceed 1000 TWh consumption globally and rising cooling demand, shifting the system’s vulnerability from fuels to grids and highlighting that without investment in storage transmission and flexibility electrification does not eliminate fragility but redistributes it into new bottlenecks that are equally critical.
The energy shock does not end in the energy market but propagates across the entire system affecting fertilizers logistics food prices inflation real wages and employment, a dynamic confirmed in 2026 when global institutions warned that rising energy and fertilizer costs could push tens of millions of additional people into food insecurity while increasing fiscal pressure in import dependent economies, and in Europe persistent energy price volatility is estimated to reduce potential output by close to 1 percentage point by 2027 equivalent to approximately 200 billion euros annually reflecting not only higher costs but delayed investment reduced industrial competitiveness and structural economic erosion, while sectors such as chemicals steel and fertilizers which together represent a significant share of industrial energy consumption have already reduced production capacity in several regions, demonstrating how energy volatility reshapes industrial geography redistributes production and ultimately influences political stability, while global emissions continue to rise at a slower pace and energy intensity improvements remain limited at around 1% annually confirming that demand growth continues to outpace efficiency gains leaving the system exposed to geopolitical shocks even as it attempts to decarbonize.
Every energy shock destroys stability but also generates value and the critical question is who captures that value, as LNG exporters increased revenues significantly during recent crises with spot prices multiplying by factors between 2 and 4 in peak periods while global LNG trade exceeded 400 million tons annually traders captured arbitrage margins often above 10% storage operators benefited from seasonal spreads and freight rates in disrupted routes increased above 100% in extreme scenarios, while countries lacking storage capacity typically covering only 20% to 30% of annual demand or lacking integrated port systems were forced to pay premium prices without capturing any of the margin generated by volatility, meaning that without control over storage logistics contracts and financial instruments economies import shocks but export value which is a structural failure rather than a temporary imbalance and explains why resilience is not a defensive concept but a revenue generating capability that defines competitiveness in a volatile system.
The response to energy shocks cannot be limited to increasing supply or subsidizing demand because the problem is systemic rather than purely quantitative requiring a shift toward integrated system design that combines infrastructure finance and operational flexibility, which includes expanding ports with energy handling capacity capable of managing millions of tons of additional throughput annually integrating storage systems that can cover at least 25% to 30% of annual demand investing in grid expansion where transmission bottlenecks currently limit renewable integration by up to 30% in some regions scaling battery storage expected to exceed 500 GWh globally implementing demand response systems capable of reducing peak consumption by 10% to 15% developing financial structures such as SPVs and climate bonds to mobilize capital prioritizing efficiency improvements that raise energy intensity gains toward 3% annually and designing value capture mechanisms that retain margins within national systems instead of allowing them to leak through global flows, transforming energy policy into a framework for economic resilience competitive advantage and financial return rather than a reactive cost management exercise.
The transformation underway suggests that energy should no longer be treated as a sector but as a system layer that connects geopolitics industry food employment and finance raising fundamental questions about whether current policy frameworks are still adequate whether energy strategies focused on supply expansion are neglecting transmission and storage whether the energy transition is creating new forms of dependency and fragility as demand grows faster than infrastructure adaptation and whether economies are designing mechanisms to capture value from volatility or simply absorbing its costs, which implies that the real debate is shifting from energy sources to system architecture from production to control and from cost management to value capture in a context where global energy investment is expected to exceed 3 trillion dollars annually.
War travels through energy because energy has become the fastest transmission channel between localized conflict and global economic impact moving through routes ports grids contracts and prices reshaping industry food systems employment and financial stability, and in this environment the next competitive advantage will not be access to energy alone but the ability to convert energy into operational stability under pressure which requires redesigning systems through infrastructure investment integration efficiency and financial innovation allowing those who understand this shift to move from paying for shocks to capturing the value they generate ultimately redefining global economic power.
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