Global fossil fuel subsidies are projected to reach $1.1 trillion in 2026, according to a United Nations Development Program report released Monday. The figure represents a sharp reversal from 2024, when energy subsidies had fallen by roughly half as global energy markets stabilized.
The UNDP report, titled "Military Escalation in the Middle East: Cushioning the Global Shock," estimates subsidies could climb as high as $1.43 trillion if average oil prices reach $110 per barrel. The projected $1.1 trillion total reflects a $410 billion to $740 billion increase from 2025 levels.
Governments have deployed multiple intervention tools: direct fuel subsidies, tax cuts, price caps, strategic stock releases, emergency procurement, export restrictions, demand-management programs and fuel switching initiatives.
The primary driver is the most severe oil supply shock in recent history. Iran restricted traffic through the Strait of Hormuz in response to U.S. and Israeli actions. The United States and Iran are currently engaged in 60 days of peace talks.
UNDP Administrator Alexander De Croo said the global spillover of the Middle East conflict is "profound and potentially long-lasting." He noted that developing countries—many already contending with high debt burdens—have shielded their populations from immediate energy shock effects.
That protection carries a substantial cost. "To deal with today's crisis, governments are postponing tomorrow's investments," De Croo said. Funds allocated for schools, hospitals and clean energy systems are instead being used to sustain economies. De Croo warned that these countries cannot absorb the shock without international support, absorbing the impact at the expense of future growth.
"No country should have to sacrifice its future development to manage a crisis it did not create," De Croo argued. He outlined two key solutions: unlocking multilateral liquidity accessible to low- and middle-income countries and accelerating renewable energy investment. He emphasized that every clean energy investment reduces exposure to future shocks.
The projections have intensified demands for taxing windfall profits of major oil companies. Activists with groups including 350.org and Fuel Poverty Action protested outside the UK Department for Energy Security and Net Zero in London on July 1, 2026, advocating for such a tax.
The current situation mirrors 2022, when global fossil fuel consumption subsidies exceeded $1 trillion for the first time during an acute energy price shock, demonstrating a recurring pattern of government response to supply disruptions.
