Oil Shock at the Ballot Box

The world was already experiencing an energy crisis when the United States and Israel reached a provisional ceasefire with the Iranian government on April 8. High prices for refined products such as gasoline, diesel, and jet fuel are hitting hard, and Asian countries and those without stocks are some of the most exposed. Japan is drawing on its reserves and capping fuel prices, while others, including Bangladesh and Pakistan, have had to ration fuel, close schools, and cut other government services. 

For now, the direst predictions about supply shortages in Europe seem less likely to materialize. This should not obscure how much structural damage has already been done. It is unclear how much Gulf production and refining capacity will be offline for an extended period. Oil and gas prices are likely to remain higher than before the war for the foreseeable future. 

Energy crises are also political crises, and their consequences—particularly in the case of oil shocks—affect governments and voters long after the immediate crisis fades, especially if they result in higher inflation. The current crisis displays known patterns and has exposed how deeply the world still relies on oil and gas. It has also resurfaced a familiar dilemma: How should democratic governments respond to an energy shock when short-term relief tends to entrench fossil fuel dependency, and long-term investment in electrification and grids can be expensive, slow, and politically difficult to sustain? 

These debates are live particularly in France, Italy, and the United States, three key G7 countries representing nearly20% of global GDP on a PPP basis—just a bit less than China—that also face major elections between now and the end of 2027. Candidates and voters will be forced to grapple with price volatility linked to global energy markets, tensions between short-term and long-term strategy in their domestic policy environments, and deepening tension between US energy dominance, the EU's long-term growth and resilience agenda, and a China-driven “electrostate” model.

In short, these elections will see familiar policy responses collide with the fast-moving geopolitics and economic realities of 2026. These developments include the following.

An accelerating feedback loop among energy markets, geopolitical crises, and democratic responses that struggle to juggle short- and long-term viability.

Oil price shocks hit voters quickly. Incumbents tend to prioritize immediate-term measures such as releasing strategic oil reserves, capping prices, and subsidizing fuel—even if they undermine the fiscal space and political will for committing to the long-term investments in clean power, grids, electrification, and supply chain resilience that would actually reduce vulnerability. The dynamic is self-reinforcing. Rising prices shape political narratives and voter behavior, and the electoral pressures they generate push governments toward quick fixes that, in turn, unsettle markets by sending mixed messages about long-term policy direction.

This crisis has introduced some unexpected variables. With the closure of the Strait of Hormuz, markets had no reliable reference points for pricing an actual supply shock when it happened. US President Donald Trump’s habit of making policy announcements on social media has created confusion in markets that are increasingly driven by algorithmic trading, making it harder for traders to price the shock and policymakers to interpret price signals.

The contrast with nondemocratic systems is instructive. Calls to release oil from US strategic petroleum reserves function in part as a political instrument and are deployed when prices rise and incumbents feel electoral heat. China, unlike IEA members, does not communicate the size of its reserves and is shielded from direct political pressure to act quickly, even if Chinese leadership monitors prices closely. That gap between politically responsive and strategically patient energy management is one of the structural asymmetries democracies will increasingly have to consider.

The domestic politics and systemic realities of energy have shifted dramatically since the last energy crisis in 2022. This will impact upcoming elections and policy programs. 

After Russia began its full-scale invasion of Ukraine in 2022, the United States became Europe's largest supplier of petroleum oils and quadrupled its LNG exports to the EU, with further export expansion a central plank of Trump's trade policy. This has drawn Europe into the orbit of the current administration’s energy dominance politics, but it has not insulated American consumers from the crisis the United States helped provoke. 

The United States is exposed to global oil price shocks because its economy is highly oil intensive—moreso than that of the EU, China, or Russia—and its vehicle fleet runs almost entirely on petroleum products. The current crisis arrives six months before midterm and gubernatorial elections, with gasoline prices up over 35% since the conflict began and majorities of voters reporting that household finances are feeling the strain. The fight heading into November is surely to be over “affordability”. Several Democratic-led states are scaling back climate and energy efficiency programs, including fees on electricity bills that fund clean energy programs, to deliver faster relief. If elected on the back of promises to reduce energy costs, a split or Democratically held Congress could shift direction on cuts to renewable energy tax credits, LNG exports (though many new projects are already financed), and other policies. It could also constrain Trump's foreign policy adventurism by pulling the administration more deeply into domestic battles. 

France enters this crisis from a position that has changed structurally since 2022, and is in some ways stronger, in others more exposed. Nuclear and hydropower plants are running at high capacity, keeping wholesale electricity cheap relative to that of European neighbors. France is reforming how it prices the sale of nuclear power domestically, with uncertain effects on consumer electricity costs between now and 2027. The country’s fiscal space is tighter than it was in 2022. In response to the current crisis, the government has tried to split the difference and provide some support to the hardest-hit industrial vehicles but also to inject €10 billion per year by 2030 into electrification, especially for electric vehicles and heating. This may or may not move voters before the election. The gap between promise and payoff creates an opening for opposition parties. Gas prices, inflation, and the perception that the United States and Israel triggered the crisis could all feed a sovereignty politics with real electoral traction. The Rassemblement National is well-placed to exploit this shift with a version of "nuclear nationalism": promises to cut household bills, decouple France from European market rules, and prioritize cheap French energy for domestic industry over exports to European neighbors. Such promises may not be realistic and would take years to implement, but the political gains from making them would be immediate. Recent polls show center-right candidate Edouard Philippe beating Le Pen and Bardella in a hypothetical second round, but with a year still to go and energy costs likely to remain elevated, the situation could change considerably.

Italy is likely to become another European battleground over affordability, with the added variable of the current government’s relative proximity to the Trump Administration. Prime Minister Giorgia Meloni has already positioned Rome at the forefront of calls to pause or reform the EU’s emissions trading system (ETS), arguing that the cost of carbon permits is pushing up electricity prices and making Italian and European industry less competitive globally. This stance is reinforced by structural exposure. Italy remains dependent on gas and global LNG markets, and recent disruptions—including force majeure declarations by QatarEnergy affecting contracted deliveries—have sharpened concerns over supply security and price volatility. In an electoral context, this creates a strong alignment between domestic political incentives and EU-level pressure to recalibrate carbon pricing, expand fiscal support, and prioritize short-term relief. This makes Italy potentially a central actor in adjusting the balance between climate ambition and economic resilience across the EU.

Global policy frameworks are polarizing. Energy dominance and the EU’s Multiannual Financial Framework (MFF) are examples.

The Gulf crisis is likely to further harden a divide in global strategies that increasingly links energy system transformation to industrial policy, trade, security, and defense. The Trump administration's energy dominance agenda uses speed and coercion to secure commitments, using access to US markets as a bargaining chip, and exploits the vulnerability of economies still transitioning away from fossil fuels. Tatiana Mitrova and Kruthika Bala have characterized this as the logic of a "fast petro-hegemon". In the short term, it has appeared to achieve some of its aims. The United States retains significant leverage as the world's largest oil and gas producer and Europe's largest LNG supplier. China's “slow electrostate” position is structurally different. It holds dominant market positions across the clean energy supply chain, in solar, batteries, electric vehicles, and critical minerals, built deliberately over a decade partly for national security and, increasingly, geopolitical reasons. Every oil price spike makes the economic case for electrification more attractive to voters, many of whom will see China as better placed than any other country to supply this alternative.

The fast-slow dynamic between the United States and the EU is sharpening into a structural test for transatlantic relations. Washington has supported (and sometimes pushed) Europe on certain not unwelcome policy directions since before the current administration, doubling down on the break from Russian fossil fuels, reckoning more seriously with nuclear as a baseload option, and reframing energy investment as a hard security question. But the current administration has also made clear that US LNG exports can be a coercive trade instrument and that European foreign direct investment in offshore wind energy is not welcome.

It remains to be seen whether the EU's MFF negotiations convert this political moment into transformative plans for new EU revenues, jointly backed debt and a common strategic direction—for example, linking defense reindustrialization, decarbonization, and energy security—at a scale that reduces European vulnerability to future shocks. EU multiannual budget negotiations are, characteristically, slow and painstaking, but once agreements are reached, they are designed to hold firm against short-term political pressures. That insulation is both a strength and a risk. The political cost of inaction now, in the negotiation phase, is rising, and oil and gas markets may be pricing in a security premium, making it easier to argue for investing in long-term resilience. But how that opening aligns with elections in France and Italy—not to mention Poland and Spain, where voters also go to the polls in 2027, or the United States—remains one of the more consequential questions in European politics.

Andrei Covatariu is a senior associate at the Energy Policy Group (EPG) and a 2026 GMF Marshall Memorial Fellow.

The views expressed herein are those solely of the author(s). GMF as an institution does not take positions.