Which power markets are most impacted by the Middle East conflict?

Wood Mackenzie’s latest analysis explores how 13 of the world’s leading power markets are impacted by the current fuel crisis, with those most reliant on fuel imports facing the greatest risk exposure. The consultancy says the average cost of generation is set to increase by $2.30/MWh across these 13 markets if a de-escalation of the conflict enables fuel price moderation in the latter half of 2026, increasing to an average of around $8.30/MWh if current elevated price levels persist through the year.

April 10, 2026 Patrick Jowett

Image: Wood Mackenzie

The Middle East crisis has split global power markets into winners and losers, according to the latest analysis from Wood Mackenzie.

The consultancy’s latest insight, The Great Power Divide, covers how 13 power markets – Brazil, China, France, Germany, India, Italy, Japan, South Korea, Spain, Thailand, the U.S., the UK and Vietnam – are being impacted by the ongoing crisis. Since the start of the conflict, Asia spot LNG prices have risen by 94% while coal prices have increased 17-31%.

Wood Mackenzie found the countries with the greatest reliance on fuel imports are facing the greatest exposure to significant cost escalation and potential supply constraints. Japan is the most exposed of the studied power markets, with 64% of its electricity generation dependent on imported coal and gas, followed by South Korea at 56% and Italy at 47%.

In contrast, the U.S. and Brazil demonstrated minimal vulnerability, at 0-1%. Along with China and India, these countries are considered as more insulated due to their domestic fossil fuel resources and renewables, such as Brazil’s hydro-dominated generation mix.

When asked by pv magazine if renewables could help soften the situation for the countries most impacted by the crisis, Xizhou Zhou, Executive Vice President and Global Head of Power and Renewables for Wood Mackenzie, said that investment in non-fossil generation resources takes time to translate to meaningful change in the generation mix.

“For example, after a decade of phenomenal growth in renewables, China still has 56% of its generation coming from coal and gas, compared with a 68% share in 2015,” Zhou explained.

Zhou added that while renewables are an important part of the solution, many of the markets analyzed, such as Japan, South Korea, and Germany, have or had large nuclear fleets that could cushion them from fossil fuel market shocks.

“Germany chose to close all of them down, Japan is still struggling to bring back nuclear plants closed after Fukushima and South Korea’s previous governments had also planned to retire nuclear, although the current government is much more friendly,” he said.

Zhou also told pv magazine that demand-side management should not be underestimated.

“For example, after the Fukushima accident, Japan shut down all of its nuclear capacity generating 30% of its power, while coal and gas ramped up to help fill the gap, demand-side management measures were put in place – including making short-sleave shirts acceptable in business settings in the summer to reduce AC demand – and power consumption never recovered to pre-Fukushima levels,” he explained.

Wood Mackenzie’s latest analysis adds that the average costs of generating is likely to increase by $2.30/MWh across the 13 analyzed markets using its Base Case scenario, which assumes that geopolitical de-escalation will enable fuel price moderation in the latter half of 2026.

Under a High Fuel Price Sensitivity case, which presumes current elevated price levels persist through 2026, average generation costs would increase 26% on average to about $8.30/MWh. For the most impacted markets, average generation costs would rise to $22.40/MWh in Italy, $17.00/MWh in Japan and $14.40/MWh in South Korea.

Allen Wang, Vice President Head of Asia Pacific Power and Renewables Research for Wood Mackenzie, said these cost increases would represent significant policy challenges that would require governments and utilities to navigate difficult trade-offs between financial support mechanisms, regulatory interventions and retail tariff adjustments.

“For emerging markets with constrained fiscal capacity, elevated fuel costs also translate to heightened reliability risks as securing incremental fuel supplies becomes increasingly challenging during periods of market tightness,” Wang added.

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