Lebanon on the brink of energy crisis following Iran war spillover

Lebanon faces an energy crisis that extends beyond immediate fuel price volatility fueled by the Iran war, according to a study by the Arab Centre for Research and Policy Studies.

The Lebanese government announced fuel price adjustments on April 7, with 95- and 98-octane gasoline falling by LBP 21,000 ($0.23) and gas dropping by LBP 71,000 ($0.79), while diesel prices increased by LBP 27,000 ($0.30).

The broader economic disruption has already surpassed the 66-day 2006 war in terms of direct and indirect losses and displacement costs. GDP is expected to decline 5-7% should the current conflict persist for three months, MTV Lebanon reported.

The Arab Centre study identifies the crisis as the product of political and economic choices accumulated since the Lebanese Civil War, rather than solely a function of rising oil prices.

Lebanon operates a rentier model based entirely on imported petroleum products, making energy decisions hostage to global market dynamics and geopolitical balances.

This vulnerability is most visible in the electricity sector. State utility Électricité du Liban (EDL) can meet only a limited portion of demand, relying on conventional thermal plants running entirely on imported fuel.

The utility's chronic weakness has driven a qualitative shift in sector structure, with private generators, originally a temporary solution, now forming the primary electricity source for most Lebanese households.

This decentralised system carries parallel vulnerabilities, as private generators also depend on imported diesel, making electricity costs directly sensitive to global oil price movements. The result is a shadow energy economy operating outside state regulation, where households bear escalating costs without meaningful recourse.

Between internal institutional weakness and external supply vulnerabilities, Lebanon's energy sector has become a sovereignty issue, one that successive governments have managed rather than fundamentally addressed, leaving the country increasingly exposed to regional instability.