crisis

The Iran war has pushed the global energy system into a deeper crisis, with the disruption increasingly shifting from crude oil supplies to the refined fuels that power transportation, industry and economies worldwide.

While global oil markets have adapted relatively well to the loss of a significant share of Middle Eastern crude production, the refining industry has had far fewer options to compensate.

That imbalance is already visible in fuel prices.

Brent crude is around $90 a barrel, roughly 25% above its level when the conflict began on February 28 but well below its wartime peak of $118.

Refined fuel prices, however, have remained much higher. European diesel prices have risen more than 70% since the start of the war, while U.S. gasoline prices have increased around 60%.

The growing divergence suggests that the biggest energy shock may no longer be coming from crude oil itself, but from the world’s ability to turn crude into usable fuel.

Why Are Fuel Prices Rising Faster Than Oil?

The key problem is declining refinery capacity.

The International Energy Agency estimates that more than 20% of the Middle East’s 9.6 million barrels per day of refining capacity was knocked out during the conflict.

At the same time, the closure of the Strait of Hormuz has restricted fuel exports and disrupted the movement of Gulf crude.

The result has been a chain reaction.

Refineries, particularly in Asia, have had to reduce operations because of difficulties obtaining crude, while damaged Middle Eastern facilities have struggled to return to normal production.

This has created a shortage of diesel, gasoline and other refined products even as crude oil prices have retreated from their wartime highs.

How Has Russia Made the Fuel Crisis Worse?

The Middle East is not the only source of disruption.

Months of Ukrainian attacks on Russian energy infrastructure have also reduced global refining capacity.

Russian refinery throughput has fallen by nearly 30% in recent months to below 4 million barrels per day.

The decline has forced Moscow to restrict diesel exports, removing another major source of refined fuel from international markets.

The combination of Middle Eastern refinery damage and reduced Russian output has left the global market with fewer alternatives.

That is particularly important for diesel, which is essential for freight transportation, agriculture, construction and industrial activity.

Why Are Diesel Refining Margins Surging?

The shortage is reflected in refining margins.

European diesel refining margins have more than tripled since February, rising above $75 a barrel.

U.S. diesel margins have increased more than 140%, reaching a record $100 earlier this week.

These figures demonstrate how severe the shortage has become.

Refineries capable of producing diesel and other fuels are commanding exceptionally high margins because demand remains strong while available capacity is shrinking.

The problem is that simply increasing refining margins does not immediately create new refining capacity.

Building or repairing refineries can take months or years, particularly when specialised equipment is required.

Have Global Fuel Inventories Been Depleted?

Yes, and that could become one of the biggest problems in the months ahead.

Fuel stockpiles provided an important buffer when the conflict began.

That buffer is now largely gone.

According to the U.S. Energy Information Administration, global oil inventories fell at a rate of around 3.5 million barrels per day between March and July.

Stocks are expected to continue declining through the end of the year.

U.S. diesel inventories are already at their lowest seasonal level in three decades, while gasoline stocks are at their weakest seasonal level since 2012.

This leaves the market increasingly exposed to any additional disruption.

Is There a Global Fuel Production Shortfall?

The data suggests there is.

Global refinery runs during the second quarter were 5.1 million barrels per day lower than a year earlier, according to the IEA.

High fuel prices have reduced consumption, with demand for refined products falling by around 4 million barrels per day.

But that reduction has not been sufficient.

The result was still a shortfall of more than 1 million barrels per day.

The imbalance could become even worse during the third quarter.

Refinery runs are expected to remain 4.1 million barrels per day below last year’s level, while demand is projected to fall by only 2.4 million barrels per day.

In other words, fuel supply is declining faster than demand.

Would Reopening the Strait of Hormuz Solve the Crisis?

Not necessarily.

A diplomatic breakthrough between Washington and Tehran that permanently reopened the Strait of Hormuz could send crude prices sharply lower.

But cheaper crude would not automatically translate into cheaper gasoline and diesel.

The reason is that the refining infrastructure itself has been damaged.

More than 20 Gulf refineries suffered damage during the war, and many require extensive repairs.

Crucial equipment such as compressors, heat exchangers and specialised catalysts can take significant time to obtain.

Lead times for some of these components were already stretched before the conflict.

Consequently, even if crude shipments resume quickly, refinery capacity could remain constrained for much longer.

Why Is China Important to the Energy Crisis?

China’s response could have a major impact on global fuel markets.

China is the world’s second-largest refining centre and sharply reduced refinery processing rates and fuel exports during the conflict.

If Beijing keeps exports limited, the international market will lose another potential source of refined products.

Conversely, an increase in Chinese refinery utilisation and exports could provide some relief.

But China must also balance domestic fuel demand, inventory requirements and its own energy security.

That makes its decisions particularly important for Asia and the wider global market.

Could the Energy Crisis Fuel Global Inflation?

The answer could be yes.

The immediate impact of higher fuel prices is already appearing in inflation data.

U.S. consumer prices rose 3.4% year-on-year in July, with energy costs increasing 14.7% and gasoline prices rising 24.6%.

Euro zone inflation accelerated to 2.9%, driven partly by a 10% increase in energy costs.

Japan’s producer price index rose 7.2% in July.

These figures raise concerns that the energy shock could spread beyond fuel markets.

Higher transportation costs increase the cost of moving goods, while expensive diesel raises costs for agriculture, manufacturing and logistics.

If those increases persist, businesses may eventually pass them on to consumers.

Why Could the Energy Crisis Last for Years?

The central problem is that refining capacity cannot be restored as quickly as crude production.

Oil wells can continue producing once transportation routes reopen.

Refineries, however, require complex infrastructure, specialised machinery, skilled workers and maintenance.

If damaged facilities need major reconstruction, restoring capacity could take years.

At the same time, depleted fuel inventories will eventually need to be rebuilt.

That means refiners could face sustained pressure to process more crude even after the immediate crisis ends.

The result could be a prolonged period of elevated refining margins and fuel prices.

What Does This Mean for Europe and Asia?

Europe and Asia could face particularly severe pressure.

Both regions rely heavily on imported energy and have already experienced increases in refined fuel and liquefied natural gas prices.

For European economies, expensive diesel could increase transportation and industrial costs.

For Asian economies, disruptions to Gulf crude supplies and reduced Chinese fuel exports could create additional pressure.

The combination of higher fuel and LNG prices could therefore create a broader energy inflation shock rather than an isolated oil-market disruption.

Could Consumers Eventually Reduce Demand?

Demand destruction remains one of the few mechanisms capable of restoring balance.

If fuel prices remain extremely high, consumers may drive less and businesses may reduce transportation and energy consumption.

Companies may also delay investment and cut production.

That could eventually reduce demand enough to ease pressure on the refining system.

But demand destruction carries an economic cost.

A reduction in fuel consumption caused by efficiency improvements is very different from a decline caused by households and businesses being unable to afford energy.

The latter can slow economic growth while inflation remains elevated.

Analysis: Why the Refining Crisis May Matter More Than the Oil Shock

The most important lesson from the Iran war energy crisis is that the global energy system is not simply dependent on how much oil exists, but on whether the world can refine and transport that oil into usable fuel.

The crude market has shown considerable resilience.

Refined fuel markets have not.

That distinction could determine how long the current energy shock lasts.

Even if diplomacy reopens the Strait of Hormuz and crude prices fall, damaged refineries, depleted inventories and reduced Russian exports will continue to constrain fuel supplies.

This creates a particularly difficult situation for central banks.

If energy prices rise temporarily, policymakers can theoretically look through the shock. But if fuel shortages persist for months or years, higher transportation and production costs can become embedded across the economy.

That would make the assumption of a short-lived inflation shock increasingly difficult to defend.

The depletion of global inventories is perhaps the biggest warning sign.

Stockpiles normally provide a cushion against geopolitical disruptions. That cushion has now been significantly weakened.

As a result, another major refinery outage, shipping disruption or escalation in the Middle East could produce a much larger price response than it would have before the war.

The world therefore faces a dangerous mismatch: crude supplies may recover faster than the infrastructure needed to turn them into fuel.

That is why the energy crisis could outlast the war itself.

The Iran conflict may have started as a crude oil shock, but its most consequential economic legacy could be a prolonged global shortage of refined fuels, keeping inflation and energy costs elevated long after the fighting ends.

With information from Reuters.

The nearly nine-month extended deployment of the USS Abraham Lincoln in the Middle East has triggered a mental health crisis among the crew so intense that some sailors have tried to jump overboard, according to some US media reports.

Family members of the exhausted military crew on board the flagship aircraft carrier, reportedly located in the Gulf region, say there are food shortages, while broken toilets and showers have contributed to unsanitary conditions and poor health.

More than 5,000 staff members have been on board the vessel, which has been conducting maritime security and blockade operations at present around the Strait of Hormuz, for that time. It set sail on November 21, 2025 from its homeport of San Diego for an extended deployment to the Asia Pacific and the Middle East.

Since then, the ship has made just one single-day port stop at Naval Base Guam from December 11-12. The lack of port stops is a major issue for a ship the size and complexity of the USS Abraham Lincoln, experts say.

As US President Donald Trump and his defence secretary, Pete Hegseth, declare the United States is ready to continue an “indefinite” blockade on Iranian ports in the Gulf, we look at how this compares with other lengthy aircraft carrier deployments.

What is happening on board the USS Abraham Lincoln?

Reports by two US publications that cover military affairs, the Navy Times and Stars and Stripes, last week quoted family members of military personnel on board the vessel who said they were suffering from declining mental health and morale, and cases of suicidal ideation.

The Navy Times spoke on record with one sailor’s wife, identified as Annabelle Loma, who said he had attempted to jump overboard amid what she described as “severe burnout”.

The reports prompted urgent questions from US lawmakers. On Sunday, Admiral Brad Cooper, commander of US Central Command (CENTCOM), reportedly visited the USS Lincoln.

He praised the crew and stated on social media that “service at sea for long periods isn’t for everyone, while claiming the ship has the lowest number of mental health-related cases of the navy’s 11 active aircraft carriers. “It is uniquely challenging and tough, and every single one of us, including me, reacts to stressors in different ways,” he said.

But there is growing concern among Republican and Democratic lawmakers over what they see as a lack of accountability after Hegseth dismissed mental health reports last week as “completely misrepresented”.

When Trump was asked last week whether the USS Lincoln had been at sea for too long, he told reporters: “No, not nearly long enough.”

The USS Lincoln mission was supposed to end in May but has been extended repeatedly since then.

Last week, it emerged that another ship, the USS George Washington, has been rerouted from its position in the Pacific and will arrive in the Gulf within a week to take over duties from the Lincoln.

How long can US aircraft carrier deployments be?

The longest aircraft carrier deployment since the Vietnam War was the USS Gerald R Ford’s 326-day mission, which began in June 2025, under Trump’s second term in the White House.

That mission included NATO exercises in the Mediterranean, support for the US military operation that captured Venezuelan President Nicolas Maduro, and operations in the Red Sea during the US-Israel war on Iran.

After beginning its mission as a routine deployment to the Asia Pacific region, the Ford then moved into the South China Sea for security operations, before being deployed to the Arabian Sea and the Gulf of Oman to help the US enforce its naval blockade of the Iranian ports.

During this time, the USS Ford met several technical problems, including an onboard fire, which also triggered congressional scrutiny back home.

Lengthy deployments during the Vietnam War

Some of the longest aircraft carrier deployments in US history took place in and around the Gulf of Tonkin during the Vietnam War, with the USS Midway operating for 332 days, the USS Coral Sea operating for 329 days and the USS Saratoga operating for 308 days.

Similar to the USS Lincoln, they faced issues as well. Reports said the intense flight schedule of the active air combat during the Vietnam War pushed crew and operations to their limits.

While there are a number of lengthy aircraft carrier deployments from other countries, they pale in comparison to the US Navy’s record.

Russia’s Admiral Kuznetsov conducted a five-month mission to the Syrian coast which began in October 2016, but suffered several technical breakdowns, including aircraft losses.

The United Kingdom’s HMS Queen Elizabeth completed a seven-month deployment in 2021, which included combat strikes on targets in Iraq and Syria, despite significant breakdowns due to engineering issues.

Why is this issue so critical?

Many lawmakers have raised questions over whether the US can maintain an “indefinite” blockade in the Gulf if conditions on board a flagship aircraft carrier are so dire.

In a letter to Hegseth last week, Democratic Senator Richard Blumenthal raised the alarm over reports of deteriorating mental health on board, as well as shortages of basic supplies, water contamination, an increase in safety incidents and even disruptions to mail services, through which those on board receive care packages.

“These reports warrant immediate attention, but they also raise a broader question: whether the Navy can sustain the operational tempo now being demanded of its carrier force, particularly as this administration repeatedly commits US forces to conflicts of its own choosing and increasingly relies on aircraft carriers to sustain those operations,” Blumenthal wrote.

Experts say the lack of port stops is a major issue for the USS Abraham Lincoln.

Harlan Ullman, a retired senior naval officer and chairman of the strategic advisory firm Killowen Group, told Al Jazeera that ships require onshore care to keep advanced technology operational over long periods.

“Ships need maintenance, particularly ships that are extremely complicated with very advanced weapon systems such as nuclear-powered carriers with very advanced systems, and there are things that you cannot do in terms of maintenance under way,” Ullman said.

“There are lots of things that you can do at sea, but there are far more things that can only be done in port,” he pointed out.

Ullman noted that extended deployments “erode the readiness and capability of that ship the longer it’s at sea, and it lacks the ability to repair and extend maintenance”.

He added that the Trump administration must prioritise naval readiness over politics, saying “this is a national issue, not a local one; and the administration should not be so defensive. It should say, ‘OK, we’ll see what’s going on, and then if there are some issues, we’ll take care of them.’”

What are the drawbacks of deploying aircraft carriers?

Aircraft carriers are built to be on deployment for many months at a time. However, that comes with a high cost, as extended cruises increase the risk of technical breakdowns and can also lead to reduced staff morale and mental health concerns.

Large aircraft carriers are expensive. The USS Abraham Lincoln cost $2.2bn to build in 1989, and it costs tens of millions of dollars to operate on a daily basis.

Recent conflicts in the Red Sea have also underscored the vulnerability of large aircraft carriers. Houthi rebels, who do not possess a formal navy, have nevertheless managed to put significant pressure on large US Navy aircraft carriers operating near the limits of their missile range.

At one point during the US-Israel war on Iran, the USS Gerald Ford was forced to sail hundreds of miles away from the Iranian coast to reduce the risk of being hit by missiles, limiting its effectiveness.

London, United Kingdom – For several weeks, until her daughter is paid, Donna O’Hara is unable to buy food. On those days, she goes to a food bank instead, or borrows money to get by.

The 54-year-old, who has four children, started relying on food banks, nonprofit initiatives that collect and provide free emergency food to those in need, after her son and his girlfriend moved out following the birth of their baby in February. They had been contributing to the household bills, and losing that income tipped things over the edge.

“Mentally, it’s just stressful and it’s embarrassing having to go to the food bank, utterly embarrassing,” she says. “I hate asking people for help. I hate borrowing money.”

The stress compounds an already precarious situation.

O’Hara has multiple myeloma, a blood cancer, and has been hospitalised three times since October on life-saving antibiotics after infections forced her to pause chemotherapy. Her cancer is in remission, but doctors have told her it is likely to return before she can resume treatment. Her husband died of lung cancer last year.

Two of her children are on Universal Credit, the UK’s main working-age welfare monthly payment, including support for housing, children and low income or unemployment.

After paying child maintenance, her son is left with 340 pounds ($460) a month to live on after the payment. He cannot work because he is waiting for gallbladder surgery.

“Who can live on 340 pounds a month?” O’Hara said. “And because I’m always helping him out, that cuts into my money.”

Her own housing benefit payment is 1,800 pounds ($2,440) a month, against rent of 2,500 pounds ($3,390) for a private property with the downstairs toilet she and her late husband both needed because of their cancer treatment. She has fallen behind, and expects to be evicted.

“The day the bailiffs come round, I must be packed and ready to go into the housing they put me in,” she said. “Who knows where I’m going to end up?”

‘Damaging structural factors’

The UK has been in an acute cost of living crisis since inflation surged from late 2021, driven initially by pandemic disruption and then by the spike in energy prices following Russia’s invasion of Ukraine.

But for households like O’Hara’s, the strain runs deeper, with its roots in more than a decade of austerity, weak wage growth and stagnant productivity, compounded by the economic impact of Brexit.

That longer history is central to Prime Minister Andy Burnham’s political pitch. To tackle the UK’s cost of living crisis, the new premier has set out a 10-year plan built around expanding social and affordable housing, reforming Universal Credit and investing in local economies.

He is currently touring the nation to engage with people’s financial concerns.

Universal Credit is meant to act as a safety net, but for many, including O’Hara, it no longer stretches far enough to cover it.

Research from the Joseph Rowntree Foundation puts scale behind stories like O’Hara’s.

“We estimate 7.4 million low-income families were unable to afford at least one essential item in the last six months,” said Sam Tims, the charity’s lead analyst, pointing to cutbacks on heating, toiletries and food. “This is at a record high.”

Tims traced the roots directly to policy choices.

“The combination of all these damaging structural factors has left our economy weaker, our wages lower, our rents higher and our income safety net in need of repair,” he said, noting that the basic rate of Universal Credit support is lower now than a decade ago.

He welcomes the removal of the two-child benefit limit in April, estimated to have lifted about half a million children out of poverty, but argues it needs to be paired with a “protected minimum floor” in Universal Credit and higher local housing allowance rates to make private rents affordable again.

Adam Lang, director of policy at Carnegie UK, says the think tank’s polling shows just more than a quarter of households could not afford an unexpected 850-pound ($1,150) expense, and one in 20 cannot afford to feed everyone at home.

“What is striking is that we’ve conducted the same survey for the last three years and we see no real improvement on most of these measures,” he said.

Lang cautiously supports Burnham’s approach, but warned against expecting a single set of measures to fix things.

“It is heartening to hear the UK government talk of a 10-year plan,” he said. “On the other hand, it is clear that life is too hard for too many and change is required.”

He argued that governments need to track wellbeing alongside growth and employment, so policymakers can see “not just how the economy is performing, but how people are doing”.

Evelyn Henderson-Child, senior researcher at the Centre for Local Economies (CLES), said that even when growth does happen, it does not reliably reach those navigating the crisis.

“GDP [Gross domestic product] can kind of swish on upwards while the foundational conditions of life, community resilience and people’s financial stability are eroded,” she said, pointing out that growth-focused policy tends to prioritise high-productivity sectors while overlooking the ones that actually sustain society and offer significant amounts of employment, such as food, retail, transport, housing and care.

The answer lies less in growth itself and more in who benefits from it, she believes.

“Traditional policy tends to rely on patching up inequality, if it does at all, after wealth is generated and concentrated at the top,” she said. “It’s about pre-distribution, rewiring the economic system from the get-go so that economic and social benefits are spread more evenly.”

But the debate over growth statistics and structural reform is of little consequence for O’Hara.

“Some people say ‘work on a budget’. Try working on a budget when you have to count your pennies just to get a loaf of bread,” she said. “It’s not my fault I got cancer and can’t go to work. Life shouldn’t be like that.”

Aug. 15 (UPI) — Hungarian working crews are sinking two barges into the Danube River in an attempt to raise water levels and stave off an energy crisis, the prime minister said on Saturday.

Water levels of the 1,800-mile river have fallen to record lows amid a months-long drought across Europe.

To raise the waters, crews are sinking two 260-foot barges into the Danube River.

Hungary’s only nuclear power plant, Paks, depends on water from the river to cool down its reactors.

Prime Minister Peter Magyar said current water levels on Saturday were 48 inches lower than usual, and could fall a further 4 inches by Monday.

If it falls that low, he added, the power plant would have to shut down one of its last two functioning turbines.

“Water management experts are continuously monitoring the water level, water velocity, and riverbed condition using a measuring vessel and installed measuring devices,” Magyar said in a statement on X.

The plant is responsible for generating half the electricity needed by the country’s 10 million people.