Higher oil prices won’t save the EV industry (but they’ll help)

That case still stands. But the war in Iran has pushed another argument to the fore: electrification is also about energy security. When oil markets are severely disrupted, the case for moving transport, as well as other strategic parts of the economy away from oil, becomes far more apparent.¹

The EV market growth journey

More than 17 million electric cars were sold worldwide in 2024 accounting for over one in five new car sales, and the global EV fleet reached almost 58 million vehicles. In the first quarter of 2025 alone, more than 4 million electric cars were sold, up 35% year on year.³

While this clearly indicates the market is by no means collapsing, global figures do not account for increasing regional differences. This is especially visible when comparing those promising adoption rates with recent announcements by Western automakers to scale back EV production in response to tepid demand.²⁰

Regional divergence in EV adoption

China remains the main driver for EV growth, while Europe is moving forward, but at an irregular and staggered pace. The United States on the other hand, is witnessing a reversal of previously sustained adoption.¹⁸

Upfront cost is still a major barrier to consumers, while charging infrastructure and convenience affects confidence. This results in many buyers, despite being interested in EVs, still not being ready to switch. Deloitte and McKinsey both point to the same broad reality: demand remains real, but it is more conditional than before.⁵

Europe illustrates this point well. Battery-electric vehicles accounted for 17.4% of new car registrations in 2025, while hybrids took 34.5%, making them the largest category.⁶ That is not a failed transition by any means, but rather a gradual and contested one. Consumers are moving away from pure petrol and diesel, but often through intermediate technologies rather than in one leap.

Policy and shifts in Western legislation, remains central to this story, especially when considering that EV adoption has never been driven by consumer preference alone. Uptake has historically been heavily influenced by incentives, emissions standards, industrial strategy and charging infrastructure. Where support has softened, demand has also weakened. Germany’s 2024 subsidy retreat and its impact on EV sales exemplifies this, and prompted the recent roll out of a new subsidies package.¹⁹ In the United States, efforts to roll back Biden-era vehicle rules, together with the earlier end of federal EV tax credits, have added to uncertainty⁷ and directly impacted growth.¹⁸ Meanwhile, in Europe, the EU Commission’s decision to allow manufacturers more flexibility in meeting near-term CO₂ targets has certainly reduced the velocity of the trajectory, even if it has not altered the long-term direction of travel.⁸

Energy security on the global agenda

The above contexts matter as backdrop against which the Iran war is playing out. The conflict has forcibly inserted energy security straight back into the centre of the global discussion. In March 2026, the IEA described the Middle East crisis as the largest oil supply disruption in oil market history. That gravity of that statement should not be taken lightly. In addition, the geographical proximity and the resulting closure of the Strait of Hormuz, one of the world’s most important energy chokepoints, has further escalated the supply crisis.⁹ The Strait is critical not only for oil, but also for liquefied natural gas (LNG). When disruption hits there, the consequences spread quickly through fuel markets, trade flows, industrial costs and inflation.¹⁰ To state this crudely (oil pun intended), when the Straight closes, the rest of the world rushes to stockpile resources.

As a result of the blockage, Reuters reported on 23 April 2026 that Asia’s crude imports had fallen sharply, and refiners were cutting runs as the war and the closure of Hormuz continued to disrupted supply.¹¹ In that context, the case for electrification becomes broader than climate policy alone. It becomes a question of long-term resilience.

Higher oil prices however do not automatically equate to an EV boom. More expensive petrol can improve the running-cost case for EVs and shorten payback periods, but it does not remove the higher upfront purchase price that still deters many buyers.¹² Even so, fuel shocks can, and do, change consumer behaviour quickly. Recent data suggests that rising petrol prices linked to the conflict have already increased EV sales in parts of Europe. ¹⁴

Therefore, if the Iran war does not shift the EV story, it certainly reframes it. IEA’s March 2026 analysis on oil shocks shows that electrification and efficiency help households, businesses and governments shield themselves from oil-market disruption.¹⁵ In other words, electrification is not only a decarbonisation strategy, i is an insurance policy against fuel insecurity.

But this is only half the story.

Electrification does not eliminate dependency, it shifts it

Moving away from oil solves one problem, but it increases dependence on other strategic inputs: minerals, refined materials, battery manufacturing, charging networks, grid capacity and reliable power generation. The IEA has repeatedly warned that lithium, nickel, cobalt, graphite and manganese are central to battery supply chains, while copper and aluminium are essential to the electricity systems that make electrification possible.¹⁶ That matters because the energy security case for EVs cannot be separated from the resilience of mineral and power supply systems. A country can reduce exposure to oil and still remain vulnerable if its battery materials, processing capacity or grid infrastructure are concentrated, delayed or politically exposed. The risk does not simply disappear, it shifts.

Thus, the current moment should not be read as a simple contest between oil and EVs. It is better understood as an intersection of climate strategy, industrial policy, mineral security and geopolitics. Companies and governments that treat electrification only as a consumer trend will miss the deeper shift currently underway. Those that treat it as part of a wider resilience strategy, will be better placed to respond.

This is where TDi can Help…

Understanding the next phase of electrification requires more than simply following sales data. It requires a clear view of how policy shifts, market signals and geopolitical risk interact, and what that means for supply chains, investment decisions and transition planning.

TDi Sustainability works with companies across mining, metals, minerals and renewable energy value chains to interpret these risks and turn them into practical strategies and solutions. This includes assessing market and policy developments, identifying supply chain and energy security exposures, and supporting more resilient decision-making in a fast-changing operating environment.

Get in touch to discuss how TDi can support your business.

References

1. International Energy Agency (IEA), Sheltering From Oil Shocks, 20 March 2026, on electrification and efficiency as resilience strategies that reduce oil dependence. Accessed 23 April 2026.
2. International Energy Agency (IEA), Global EV Outlook 2025, 14 May 2025, executive summary. Accessed 23 April 2026.
3. IEA, Global EV Outlook 2025, executive summary; and ‘Trends in electric car markets’, 14 May 2025, on global electric car sales exceeding 17 million in 2024 and first-quarter 2025 sales exceeding 4 million, up 35% year on year. Accessed 23 April 2026.
4. IEA, Global EV Outlook 2025, executive summary and market trends sections; and BloombergNEF, Electric Vehicle Outlook 2025 coverage, on China leading global EV scale and the US market slowing relative to China. Accessed 23 April 2026.
5. Deloitte, 2025 Global Automotive Consumer Study, 2025; and McKinsey Center for Future Mobility, ‘New twists in the electric-vehicle transition: A consumer perspective’, 22 April 2025. Accessed 23 April 2026.
6. European Automobile Manufacturers’ Association (ACEA), ‘New car registrations: +1.8% in 2025; battery-electric 17.4% market share’, 27 January 2026. Accessed 23 April 2026.
7. Reuters, ‘Trump administration takes aim at Biden electric vehicle rules’, 12 March 2025; and Reuters, ‘US electric vehicle tax breaks will expire on Sept. 30’, 3 July 2025. Accessed 23 April 2026.
8. European Commission, ‘Commission proposes flexibility to help manufacturers comply with CO2 emissions standards for new cars and vans’, 31 March 2025. Accessed 23 April 2026.
9. IEA, Oil Market Report, March 2026; and IEA, Sheltering From Oil Shocks, 20 March 2026. Accessed 23 April 2026.
10. U.S. Energy Information Administration (EIA), ‘Amid regional conflict, the Strait of Hormuz remains critical to global energy security’, 16 June 2025; and IEA background material on Strait of Hormuz LNG flows. Accessed 23 April 2026.
11. Reuters, ‘Asia deepens refining cuts due to Iran war, putting diesel and jet fuel supplies at risk’, 23 April 2026. Accessed 23 April 2026.
12. Financial Times, ‘Will $100 oil speed up the EV shift?’, 1 April 2026; and IEA, Global EV Outlook 2025, affordability sections. Accessed 23 April 2026.
13. Financial Times, ”Pump anxiety’ from soaring fuel prices prompts surge in EV interest’, 30 March 2026; and Reuters, ‘EV sales soar in main European markets as drivers shun expensive petrol‘, 19 April 2026. Accessed 23 April 2026.
14. IEA, Global EV Outlook 2025, outlook for energy demand. Accessed 23 April 2026.
15. IEA, Sheltering From Oil Shocks, 20 March 2026. Accessed 23 April 2026.
16. IEA, The Role of Critical Minerals in Clean Energy Transitions, 2021, executive summary. Accessed 23 April 2026.
17. IEA, Global EV Outlook 2025, ‘Electric vehicle charging’, on public charging point growth in 2024. Accessed 23 April 2026.
18. Shrestha, Rajat, Devashree Saha, Danielle Riedl and Alyssa Kashin, ‘For the US EV Market, a More Turbulent Road Lies Ahead’, World Resources Institute, 14 April 2026. Accessed 24 April 2026.
19. Agence France-Presse, ‘Germany brings back electric car subsidies to boost market’, France 24, 19 January 2026. Accessed 24 April 2026.
20. Davies, Christian, ‘GM discloses $7bn hit from EV transition and China restructuring’, Financial Times, 8 January 2026. Accessed 23 April 2026.