The Crisis in Iran: Implications and Actions for Sustainable Business

The crisis in Iran is approaching its third month, with profound and mounting implications for the global economy (including energy, food, and other critical inputs) and for people (including significant risks to their human rights). The head of the International Energy Agency recently described the crisis as ‘the biggest threat to energy security in history,” and its cascading impacts hold the potential to reshape industry, supply chains, geopolitics, and societies. Recent developments, including a fragile ceasefire and US blockade of Iranian oil, suggest that the crisis has entered a more protracted and uncertain phase. Even as active hostilities ebb and flow, the underlying disruption to energy systems and global trade persists.

Since the early days of the conflict, traffic through the Strait of Hormuz, one of the world’s most critical chokepoints and which accounts for nearly 25% of the world’s seaborn oil transport, has been severely constrained, triggering a chain reaction across the global economy. Shipping has been rerouted or put on hold, insurance costs have surged, and logistics networks are under intense strain.

Attacks on key infrastructure such as gas fields in Qatar and desalination plants in Kuwait have caused damage that will take years to repair.

These disruptions have cascaded well beyond energy. Supply chains for industrial inputs—from petrochemicals to fertilizers—have tightened, while higher freight costs are affecting everything from textiles to electronics. Food systems are also under strain, as higher fertilizer prices and disrupted transport routes begin to affect agricultural production and distribution.

The impacts are highly uneven across geographies—and people are being affected differently based on their location, access to resources, and any other factors contributing to marginalization. In parts of Southeast Asia, fishing fleets are idle because fuel is unaffordable. Truck drivers and transport workers are seeing incomes collapse and some have gone on strike to protest high fuel prices. Governments are rationing fuel, shortening school weeks, and imposing emergency conservation measures. Violence has broken out over scarce fuel supplies, leading to deaths in India, Pakistan, and Bangladesh.

Migrant workers, who make up a significant share of the workforce in the Gulf region, and other vulnerable groups are among those most exposed to the impacts of the crisis. They often continue essential work in high-risk conditions while facing heightened insecurity, job loss, and limited protections. Disruptions to shipping and supply chains are also increasing risks for workers globally—from seafarers stranded in conflict-affected waters to factory workers facing closures and delayed wages. The humanitarian impacts are significant and growing, with more than a million people displaced in Lebanon and large-scale displacement across the region, compounding pre-existing vulnerabilities.

For business leaders, the immediate impacts include higher energy prices, shipping delays, constrained access to key materials and commodities, and operational uncertainty. At the macroeconomic level, growth forecasts have been revised downward, inflationary pressures are rising, and the risk of recession is increasing. Businesses with operations in the region face additional concerns around the safety and security of their workers and their infrastructure, as well as the risk of complicity in human rights abuses.

What remains less clear are the long-term implications, and what these will mean for business strategy and sustainability. What seems certain is that a prolonged volatility and risk will necessitate proactive efforts to strengthen resilience and safeguard business value and livelihoods. By acting responsibly, companies can continue operating in challenging markets, mitigate foreseeable risks, and actively support the economic, social, and environmental conditions that enable peace and stability.

Topics

• Human Rights
• Sustainable Futures Lab

Three Scenarios for What Comes Next

Regardless of when and how the hostilities finally end, a rapid return to normalcy appears unlikely. A more plausible range of outcomes falls into three scenarios, depending on the duration of the conflict, the extent of lasting damage to infrastructure, and the impacts affecting economies around the world.

1. Fragile Stability (uneasy ceasefire, persistent volatility)

A ceasefire holds, but tensions remain high. Shipping through the Strait partially resumes, but access remains constrained, costly, and politically mediated, with persistent uncertainty around transit conditions. Risk premiums, insurability issues, and intermittent disruptions persist. Energy and commodity markets remain volatile. Governments and companies operate in a heightened risk environment where shocks can recur quickly.

2. Recurring Conflict (ongoing cycles of conflict and economic attrition)

Fragile ceasefires are punctuated by episodes of active fighting without resolution or decisive escalation. Energy and commodity flows remain highly constrained, and supply chains operate under sustained pressure. Export restrictions, rationing, and policy interventions spread. Inflation mounts and growth slows.

3. System Shock (escalation and significant infrastructural damage)

Escalating attacks on energy, water, and other infrastructure drive widespread human suffering and long-term damage across the Gulf region. The supply of gas and oil is disrupted and reduced for years. Recession takes hold broadly. Governments and businesses are forced to make significant changes to industrial systems and supply chains.

Implications for Business and Sustainability

Even in the most benign scenario, elevated risk and market and supply chain disruption is likely to persist and risks of human rights abuses are more likely to occur. Infrastructure vulnerability, geopolitical tension, and market fragmentation will continue to shape the operating environment.

Businesses must build capabilities not only to respond to this crisis, but to navigate ongoing uncertainty and disruption across these interconnected systems and prepare for future outbreaks in the region.

Even if the conflict de-escalates, the vulnerability of critical energy and trade systems is likely to introduce a lasting risk premium—raising costs, reshaping investment decisions, and altering expectations about stability across global markets.

From the energy transition to volatile geopolitics and rising human rights risks, businesses can consider the following implications for sustainable business in the current context:

1. Globalization becomes more fragile but “reluctant interdependence” persists

Despite the challenges that complex interconnected supply chains pose, the crisis is unlikely to drive a wholesale retreat from global economic integration. Instead, it highlights (as do other recent crises from COVID to Ukraine) how deeply interconnected the global economy is, and how difficult and expensive efforts to achieve “sovereignty” are in practice.

Companies will continue to find that supply chains that are purely driven by efficiency remain highly exposed to critical vulnerabilities and cascading failures. Additionally, as a result of this interdependence, disruptions in one sector (e.g. energy) quickly cascade into others, such as agriculture and manufacturing.

For example, a significant share of global fertilizer trade depends on flows through the Gulf, and recent constraints have already driven sharp price increases and supply shortages. For food and agriculture value chains, this is exposing how deep dependency on fossil-derived inputs creates acute vulnerability to disruption.

These disruptions are already accelerating shifts in trade and political relationships. As countries seek to reduce exposure to chokepoints and geopolitical risk, they are strengthening ties with a wider set of partners and exploring new regional and cross-regional alignments. This includes efforts in Europe to deepen economic relationships with partners in Asia and Latin America, as well as broader moves across Asia and other regions to diversify sources of energy, materials, and manufacturing capacity. In some cases, this also means hedging reliance on traditional partners, such as the United States.

Countries are also reconsidering the balance between imported and domestically produced resources. Supply chains and market access have always been shaped by geopolitical relationships, cost, and efficiency. However, this signals a more dynamic landscape in which geopolitical relationships will carry even greater strategic importance.

In this context, the strategic questions shift: where does interdependence create unacceptable risk, how can those risks be managed or mitigated, and how should supply chains, partnerships, and market strategies evolve to build resilience in a more dynamic and politically shaped landscape?

2. The energy transition may accelerate while also becoming harder

In today’s political environment, energy security has emerged as a compelling rationale for electrification and renewables deployment, in addition to climate ambition. It has been observed that the energy shocks of the 1970s did more to shift the world away from fossil fuels than did the Paris Agreement. In theory, the Iran crisis strengthens the strategic case for accelerating efforts to reduce dependence on imported fossil fuels. Electrification and renewables deployment should logically become more attractive as tools for resilience.

However, the same crisis will also complicate execution. The macroeconomic fallout means that higher interest rates and risk premiums will make capital-intensive clean energy investments harder. Supply chain disruptions will increase the cost of materials and equipment. And, of course, shifting dependencies from fossil fuel producers to the key suppliers of critical mineral and clean-tech supply chains will introduce new vulnerabilities.

What is likely to emerge is a more complex and uneven transition landscape. Parts of the economy that are already more electrified—and able to draw on domestic or regional renewable generation—may be relatively insulated from fuel price volatility. In Spain, for example, growing renewables penetration has helped buffer electricity prices even as gas markets remain volatile. In contrast, economies in Asia that remain heavily dependent on imported LNG and oil are experiencing more acute exposure to price spikes and supply disruptions.

At the same time, sectors that remain dependent on oil and gas—particularly transport, aviation, shipping, and many industrial and agricultural processes—are more directly exposed to volatility. Heavy industry in Europe and the Gulf, for example, is facing rising input costs and operational strain, while aviation and logistics systems across Asia are already adjusting through reduced activity and higher prices.

Electrification and distributed energy solutions may become more attractive where infrastructure is in place and capital is available, while hard-to-abate sectors face continued exposure to volatile fuels with fewer near-term alternatives. These dynamics will also vary by geography: countries with strong domestic clean energy capacity or manufacturing ecosystems—such as China—may be better positioned to accelerate deployment, while others face constraints related to financing, grid capacity, and access to materials and technology.

In some cases, accelerating the transition may also deepen new forms of dependency. As countries move more rapidly toward renewables, electric vehicles, and storage, demand for clean technologies—many of which are produced at scale in China—is rising sharply. This creates a new layer of strategic tension: reducing reliance on fossil fuel imports may, in the near term, increase reliance on concentrated clean-tech supply chains.

A strategic response must reduce dependency risks while strengthening industrial resilience and economic competitiveness. The key distinction will be between those elements of a transition that reduce exposure and those that simply shift it.

As energy prices rise and supply constraints tighten, there may be pressure to prioritize short-term stability over longer-term transformation. Already, near-term reactions are driving increased reliance on fossil fuels in some regions, including expanded coal use and new oil and gas investment, as countries scramble to secure supply.

Yet this crisis should be a reminder of the risks inherent in fossil fuel dependence—including geopolitical exposure, price volatility, and systemic fragility. Rather than delaying the transition, business should seek to ensure that near-term responses are aligned with a longer-term shift toward more resilient, diversified, and lower-carbon energy systems.

3. The enduring convergence of energy, industry, and geopolitics

Energy is increasingly shaping where and how companies can operate—affecting costs, margins, plant utilization, and long-term competitiveness. As a result, industrial strategy is becoming inseparable from energy strategy. Access to reliable, affordable energy—and to the materials and technologies that enable electrification—will increasingly be a key factor in where production is located and which regions remain competitive.

Geopolitics will also continue to exert pressure. Export controls, rationing, subsidies, and other forms of state intervention are becoming increasingly relevant for governments and will reshape markets. For business, this means location decisions, supply chains, and capital investments are becoming strategic bets on how energy systems and political dynamics evolve. Companies are not just choosing suppliers; they’re choosing exposure to different energy systems and geopolitical risks.

The crisis is also reshaping perceptions of global leadership and alliances. Tensions between traditional partners and the emergence of alternative coordination efforts suggest that geopolitical alignments may become more fluid, further complicating the environment in which global businesses operate.

This raises a more practical question of what “resilience” means in this context. Increasingly, it is about reducing exposure to systems that are likely to fail under stress—whether that is fossil fuel supply chains vulnerable to geopolitical disruption, unreliable governments, concentrated sourcing in high-risk regions, or logistics routes dependent on a small number of chokepoints.

In practice, this may involve diversifying suppliers across regions, investing in renewables and energy efficiency to reduce reliance on volatile fossil fuel markets, building greater flexibility into logistics and production, or maintaining higher inventories of critical inputs. These choices often come with higher short-term costs, but can reduce exposure to systemic disruption over time.

4. Geopolitics is becoming more volatile and asymmetric

Beyond the immediate impacts, the conflict may also influence how other countries assess the risks and opportunities of geopolitical confrontation. The demonstrated ability to disrupt a critical global chokepoint at relatively low cost—and the difficulty of reversing that disruption—may shape how states think about leverage in other contested regions. At the same time, tensions between allies and questions about long-term commitments are raising broader concerns about the reliability of existing geopolitical arrangements.

For business, this points to a more fundamental shift: global markets and value chains are increasingly exposed not just to isolated shocks, but to a world in which geopolitical competition is more active, more asymmetric, and more directly tied to economic systems.

5. Human impacts will drive operational risks

The most immediate effects of this crisis are being felt not by markets, but by people—workers, suppliers, and communities. Rising fuel costs, violence and hostilities, shortages, and economic disruption are already affecting livelihoods, mobility, and access to essential goods. In some markets, this is translating into lost income and business closures; in others, into rationing, reduced services, and growing social strain.

For companies, these dynamics present growing operational risks. Suppliers facing higher input costs may compromise labor standards or struggle to maintain production. Workers may face increased precarity, absenteeism, or migration pressures. While profound on their own, the social impacts of this crisis are also directly tied to business continuity.

Understanding how these shocks are affecting people across the value chain, including by conducting heightened Human Rights Due Diligence, will be essential to maintaining stable operations in an increasingly volatile context. Companies are not only exposed to these dynamics—they can also shape them. Responsible business conduct, including fair purchasing practices and support for suppliers and workers under stress, can help reduce the risk of social instability and contribute to more resilient operating environments.

At the same time, these human impacts are likely to trigger policy responses that further reshape the operating environment. As costs rise and livelihoods are affected, governments may intervene through price controls, subsidies, export restrictions, or efforts to secure domestic supply. These responses can reinforce broader trends toward market fragmentation, resource competition, and economic nationalism—creating additional layers of risk and complexity for companies operating across borders.

Actions for Sustainability Teams

Sustainability teams are close to the parts of the business where these risks are first visible, such as energy, supply chains, and human rights impacts. That creates a practical opportunity to support near-term decisions by business leaders while also informing longer-term strategy. 

1. Conduct rapid human rights due diligence

Companies can build on existing human rights due diligence approaches to assess emerging risks and impacts in real time, enabling heightened human rights due diligence in the highest-risk contexts to account for the evolving situation and the company’s role within it.

In situations where time and resources are limited, sustainability teams can conduct rapid human rights due diligence. This includes identifying where workers, contractors, and communities are most vulnerable.

• Prioritize high-risk geographies and business partners for rapid assessment
• Engage suppliers on how cost pressures are affecting wages, working hours, and conditions
• Establish escalation pathways where risks to people are increasing
• As the crisis unfolds, teams will also need to shift into response mode. This includes taking immediate action to address known risks—such as worker safety—as well as assessing whether the company can responsibly continue operating in affected markets. In practice, this may involve:
• Conducting stay–leave analyses to inform decisions on ongoing operations
• Maintaining engagement with affected stakeholders and ensuring grievance mechanisms remain accessible
• Monitoring evolving conditions to inform timely and appropriate responses
• Documenting decisions and their rationale throughout this period is critical, both for accountability and for strengthening future responses.

Over time, rapid due diligence can be leveraged to inform the build out of more robust systems for managing risk in conflict-affected and high-risk environments, as we describe next.
 

3. Identify sustainability risks across the value chain

Sustainability teams are well-advised to partner with supply chain and procurement colleagues to better understand the risks arising from rapidly changing conditions on the ground. This includes asking:

• \Where are suppliers facing rising energy or input costs that could translate into labor risks (e.g. wage pressure, excessive overtime, subcontracting)? 
• Which parts of the value chain are exposed to disruptions in critical inputs such as fertilizers, petrochemicals, or transport, and what does that mean for environmental and social performance? 
• Which sourcing regions are experiencing broader stress (e.g. fuel shortages, food price spikes) that could affect workers and communities? 

This will help clarify which environmental and social risks may intensify under pressure, inform where additional engagement or support may be needed, and improve operational continuity. 
Sustainability teams also can work with procurement to identify high-risk suppliers, update risk assessments, and ensure that sustainability considerations are factored into sourcing and continuity decisions.

4. Reframe energy and climate work through a resilience lens

Many sustainability teams already lead or influence work on energy, emissions, and climate strategy. This is an opportunity to connect that work more directly to business resilience.

This may involve:

• Highlighting how efficiency initiatives reduce exposure to volatile fuel costs
• Prioritizing electrification or renewable energy projects that improve reliability as well as emissions performance
• Updating internal narratives and business cases to reflect both transition and resilience value

The goal is not to change the direction of climate strategy, but to make its relevance to current business pressures more explicit.

6. Deepen supplier engagement on responsible practices under stress

The current crisis may create pressures that lead to deteriorating environmental and social practices across the supply chain. Sustainability teams can help maintain standards while recognizing real constraints.

This may include:

• Reinforcing expectations on labor conditions, health and safety, and environmental compliance
• Creating channels for suppliers to raise emerging challenges and risks
• Working with procurement to ensure that commercial decisions (e.g. pricing, timelines) do not inadvertently increase sustainability risks

The focus is on maintaining stability and responsible practices under pressure, not just monitoring compliance.

7. Use foresight and scenario thinking 

Although some impacts and implications of the Iran crisis are already clear, much remains uncertain. It is impossible to predict how long it will last or the likely severity of damage to critical infrastructure, among other things.

Lacking that certainty, sustainability teams should integrate foresight into their strategies and plans. This can be done pragmatically by:

• Stress-testing sustainability initiatives against multiple plausible scenarios
• Identifying which actions are most resilient and deliver value across multiple scenarios
• Surfacing where trade-offs (e.g., among cost, resilience, and sustainability outcomes) may emerge

This should not be a theoretical exercise, or take a great deal of time and resources. When companies act in a timely and judicious manner, it becomes an essential input into decisions about risk, investment, and operations.

Conclusion

This crisis underscores a broader shift. The operating environment for business is becoming more volatile and riskier, while exposing the challenges and limits of decoupling from the global economy. 

There are no safe harbors in this situation. Instead, there are varying degrees of complex and interconnected risks.

Inaction is not an option. What is emerging is not a temporary disruption, but an enduring shift in how energy, trade, and geopolitical systems function—one in which volatility, fragmentation, and interdependence coexist. 

Businesses that exercise foresight will be better equipped to identify, understand and manage risk across energy, supply chains, and their workforces at a moment when those risks are increasingly intertwined and consequential for people everywhere.

Questions for CSOs

1. Where are human rights risks most likely to intensify under current conditions? How could those risks translate into human rights impacts, operational disruption, or reputational exposure?
2. Where are we most exposed to volatile energy systems? How can electrification, efficiency, or renewables sourcing reduce that exposure over time?
3. Which parts of our value chain depend on fragile or concentrated inputs (e.g. fuels, fertilizers, critical materials), and what would sustained disruption mean for our costs, operations, and commitments?
4. How would our business perform under a scenario of repeated geopolitical shocks? Which sustainability investments today would make us more resilient to this?