Note: Single-source report; awaiting corroboration.
Renewed diplomatic efforts have temporarily eased immediate fears of escalation in the Middle East conflict involving the United States and Iran, but economic consequences are already affecting some of the world’s poorest countries, according to the United Nations Development Programme (UNDP).
The UNDP reports that developing economies are spending hundreds of billions of dollars to shield households from surging energy costs caused by instability in the region. To protect families from higher oil prices, governments have relied on fossil fuel subsidies, price caps, and tax rebates. While these measures provide short-term relief, UNDP warns they incur steep long-term costs.
Projections indicate that global fossil fuel subsidies could reach $1.1 trillion in 2026, an increase of about $410 billion from 2025, assuming an average oil price of $88.60 per barrel. A higher price of $110 per barrel could see subsidies climb to $1.43 trillion. This surge is straining already pressured public finances in low- and middle-income countries.
Many developing countries entered the crisis with significant debt burdens. Nearly half of the poorest nations are currently in debt distress or at high risk, while median debt servicing is expected to consume 9.5% of government revenue this year—the highest level in 25 years and double the share a decade ago.
UNDP highlights that allocating limited funds to fossil fuel subsidies detracts from investments in infrastructure such as schools, hospitals, and climate action, risking slower progress toward the Sustainable Development Goals. It also increases reliance on carbon-intensive energy systems.
UNDP Administrator Alexander De Croo emphasized that no country should have to sacrifice its future development to manage an external crisis. He called for easier access to international financing and accelerated investment in renewables, stressing that expanding clean energy enhances both energy security and resilience to future geopolitical shocks.