Last week, The Fusion Report started looking at the potential impact of the U.S.-Iran war on world and U.S. energy policies. In the second part of our series, we will examine the impact that the war is having on oil and gas prices, the most visible measure of the energy market. Specifically, we’ll look at various scenarios, such as how this war is being waged has changed from previous wars, as well as the impact on Russian oil prices and the ability of the Chinese market to weather changes in oil prices.
The Impact of Oil Prices on How We Source and Consume Energy
On Monday, March 9th, Brent crude oil prices hit over $102 a barrel, a level not seen since the beginning of the Ukraine-Russian war. Prior to this, the last time oil prices exceeded $100 was when Russia invaded the Crimean peninsula. Only during July 2008 was this price exceeded (again, due to hostilities in the Persian Gulf area), reaching over $147 a barrel. By August of the same year, oil prices dropped to $113 a barrel, and by October 2008, the price of crude oil further dropped to $64 a barrel.
With these sort of prices, one would have expected a change of consumption behaviors for oil. Nothing could be further from the truth. The most significant disruptor to oil prices between 2006 and 2025 was shale oil, followed by economic disruptions such as COVID and the mortgage crisis, all three of which reduced the prices of oil.
Similarly, the adoption of electric vehicles has also not been significantly affected by short-term oil prices; the EV adoption rates have been more affected by who is the U.S. president (up with Obama and Biden; down with Trump 1 and 2) than short-term oil price swings.
The Politics of Drone Warfare and GPS Jamming
In asymmetric warfare, the price of each side’s weapons can make a bigger difference than their absolute effectiveness. An example is that of GPS jamming, also a weapon of choice of the Iranians. In this case, the targets are not U.S. bases; the targets are commercial ships. More specifically, the GPS jamming is meant to affect anti-collision systems that the ships utilize to avoid each other. Given the large amount of time that a large container ship or oil tanker takes to stop or turn around, GPS jamming is a very effective means to render shipping in the Persian Gulf a lose-lose scenario.
Another example of how much has changed is in the area of anti-drone warfare. While Vladimir Zelensky, the president of Ukraine, had previously been the one asking for favors from Donald Trump, now the reverse is true. Last week, the BBC reported that the President had asked for Ukraine’s support in countering the Shahed-136 drone, Tehran’s weapon of choice in this war. With a low cost of $20,000 to $50,000 per unit, and a range of 1,200 to 1,600 miles, the weapon is effective in a war of attrition that the Iranians are used to waging. This is especially true when the other side’s weapon of choice (at least today) is the U.S. Patriot missile, a state of the art interceptor with a price range of $4M each, and costs 50 to 60 times the price of the Shahid drone..
The Impact on Russia as a Supplier, and China as a Consumer, of Oil
On the other side of the Russia-Ukraine war is another country that can benefit from the conflict of Iran, Russia. In particular, The ongoing conflict between the U.S. and Iran has positioned Russia as a major economic beneficiary, primarily due to soaring energy prices and shifting global sanctions. By early March 2026, oil prices spiked to their highest levels since 2022, providing a massive windfall for the Kremlin’s budget. When combined with the U.S. waivers to purchase Russian oil by India, Russia has been able to sell its oil at a premium of $4-$5 a barrel, compared to the discount of $10-$13 a barrel it had to sell before the war. This means more money for Russia to continue its fight against Ukraine.
Another beneficiary is China, the second largest consumer of oil at roughly 15 to 16 million barrels per day (behind the U.S.). Over the past several years, China has stockpiled very large amounts of oil in its strategic reserve, amassing between 1.2B and 1.5B barrels of oil, or approximately one-third of a year at its normal consumption rates.
What Does All of This Hold for the Future of Energy?
The impact of this conflict on the future of fusion is mixed. While its impact on the economy of the U.S. and its allies is generally negative, it clearly highlights the issues of relying on oil, especially for Europe and our Asian allies. If the conflict ends quickly, the negative impacts on the economics of fusion investment may be contained, leaving intact the impetus to develop a solution to our energy needs, even if it is longer term.
