The energy crisis triggered by the Iran war may last beyond the conflict itself, according to International Energy Agency executive director Fatih Birol. His warning points to a shift from a short-term price shock to a longer period in which governments, businesses and cities must plan around tighter supplies, higher fuel costs and less predictable energy flows.
Speaking at the Singapore International Energy Week conference, Birol said energy markets were unlikely to return to their pre-war conditions in 2027. The conflict, which began in late February, has disrupted expectations of a surplus in the energy market this year. Instead, interruptions to global energy flows have tightened supplies and pushed up both oil benchmarks and refined fuel prices.
That distinction matters for urban systems because cities do not experience an energy crisis only through the price of crude oil. They experience it through the cost of operating transport networks, construction equipment, public buildings, logistics systems, heating infrastructure and electricity generation. The evidence in Birol’s remarks suggests that pressure could remain distributed across these systems even if the military conflict eventually ends.
Birol said he did not see a credible pathway for markets to return next year to the conditions that existed before the war. He urged governments and businesses to make energy security their first priority while also preparing for what comes next. His comments place energy security alongside, rather than after, economic planning and the operation of essential services.
Oil prices have already made that shift visible. Brent crude futures rose to $117 a barrel on Friday after more Houthi attacks in Saudi Arabia, their highest level in nearly six months. Prices eased to $115 a barrel on Monday but remained about 59% above their pre-war level. Birol said oil prices were approaching $120 a barrel and that refined products were even more expensive.
For urban economies, the important signal is not only the absolute price but the extent to which the increase feeds into multiple operating costs. Fuel is used directly by road transport, freight and construction machinery. It also affects the movement of food, building materials and other goods into cities. When refined products become more expensive, the impact can therefore reach beyond fuel stations and into the budgets of public agencies, contractors, businesses and households.
The burden will not be distributed equally. Birol said oil prices near $120 a barrel might be manageable for some countries, including parts of Europe, but would have a major effect on the trade deficits of many others. That observation highlights the uneven financial capacity of governments and urban economies to absorb an energy shock. A similar global price can produce very different consequences depending on a country’s import dependence, fiscal position and ability to protect essential services.
The next pressure point is refined fuel rather than crude oil alone. Birol said winter demand was approaching in parts of the world where diesel consumption typically rises. At the same time, several refineries are scheduled for maintenance. The combination could reduce the availability of products precisely when seasonal demand increases.
This is a supply-chain problem as much as a market problem. Refinery maintenance is a planned industrial activity, while winter demand is a recurring seasonal pattern. The disruption caused by the war has brought these two predictable pressures into a much tighter market. The result, as described by Birol, is a risk that fuel availability and cost could become more difficult to manage even without a further escalation of the conflict.
Diesel is particularly significant because it supports more than private vehicle use. It is used for freight, backup power and equipment across a range of urban and industrial activities. Birol specifically referred to diesel used for heating in parts of the West. His warning therefore connects household energy needs with wider questions about the resilience of transport and essential services.
Europe faces an additional gas challenge. European countries have decided to cut imports of Russian gas, while the Iran war has disrupted gas exports from Qatar and the United Arab Emirates. Birol said these developments would put significant pressure on European gas markets during a difficult winter.
The change in gas flows shows why energy security cannot be assessed only within national borders. Cities may be physically distant from the conflict zone but remain exposed to decisions taken by exporting countries, shipping disruptions and changes in regional supply routes. The energy system that supports urban life is geographically extended. A disruption in one part of that system can affect prices and availability far away from the original event.
For city governments, this creates an institutional challenge. Municipal authorities generally do not control international energy markets, crude oil prices or refinery schedules. Yet they are responsible for maintaining services that depend on fuel and power. Their exposure is therefore indirect but operationally immediate. Higher energy costs can affect public transport operations, waste collection, water pumping, emergency services and the running of civic facilities, even when the source of the disruption lies outside the city.
Birol’s call for governments and businesses to place energy security first suggests that energy planning is moving towards resilience rather than simple cost optimisation. The warning does not establish a new programme or funding mechanism, and the supplied material does not identify specific measures that cities or national governments will adopt. It does, however, identify the conditions that planners must account for: uncertain market recovery, higher oil prices, expensive refined products, seasonal demand and disrupted gas exports.
The figures cited by Birol also indicate the scale of the transition underway in the energy sector. The IEA’s recent survey found that 90 gigawatts of nuclear power capacity was under construction, the highest level in four decades. Birol expects a strong comeback for nuclear power as countries respond to the current situation.
That expected nuclear expansion is not an immediate solution to the winter fuel pressures described in his remarks. Nuclear projects require long construction periods and substantial institutional and financial commitments. Its significance lies elsewhere: the current crisis is influencing how countries think about the reliability and strategic value of different energy sources. The fact that nuclear capacity under construction has reached its highest level in four decades suggests that the crisis is reinforcing longer-term interest in sources that can provide electricity without relying on the same fuel flows as oil and gas.
The contrast between immediate and long-term responses is central to understanding the warning. In the short term, governments and businesses must manage expensive oil, constrained refined products and uncertain gas supplies. In the longer term, they are reconsidering the structure of their energy systems. The two timelines overlap, but they cannot be solved with the same tools.
Cities sit at the intersection of these timelines. Their immediate concern is continuity: keeping transport, utilities, buildings and logistics functioning when operating costs rise. Their longer-term concern is whether the systems they are expanding will remain exposed to volatile imported fuels. Birol’s remarks do not provide a city-level blueprint, but they demonstrate why energy security is becoming a built-environment issue rather than a matter confined to energy ministries and commodity markets.
The urban consequences will also depend on how costs are passed through the economy. Higher fuel prices can affect public agencies, businesses and households differently. Birol’s reference to trade deficits shows that the macroeconomic impact can be substantial for some countries, while the pressure on refined products points to operational costs faced by specific sectors. The supplied evidence does not quantify the effect on any particular city or country, so the local distribution of the burden remains uncertain.
What is established is that the pre-war energy market conditions cannot be assumed to return quickly. Oil prices remain well above their pre-war level, diesel demand is expected to rise during winter in some regions, refinery maintenance may tighten refined-product supplies, and European gas markets face additional pressure from changed import and export patterns. These are separate developments, but together they create a more fragile operating environment for energy-dependent urban systems.
The broader question is whether the crisis will be treated as a temporary disruption or as evidence that urban infrastructure must be designed for prolonged energy uncertainty. Birol’s warning favours the second interpretation, while his reference to nuclear construction indicates that some countries are already responding through longer-term changes in energy capacity. The available evidence does not show how quickly those changes will affect cities or whether they will reduce near-term exposure to oil and gas markets.
For now, the key milestones are the evolution of the conflict, the movement of oil prices, winter diesel demand, refinery maintenance schedules and the availability of gas exports from major suppliers. The IEA chief’s central message is that governments and businesses should not plan on a rapid return to the energy conditions that existed before the war. That makes energy security a continuing urban planning and economic management concern, not merely a consequence of the conflict itself.
