The energy squeeze behind the Iran war and AI boom

Energy — whether it be oil for cars or power for data centers — is suddenly the world's biggest constraint.

Why it matters: Energy is becoming the singular driver of both global stability and economic growth.

• Oil shocks from the Iran war are rippling through inflation and geopolitics.
• The AI boom is triggering a global race for electricity that grids aren't ready for.

The big picture: Energy is the thing we all need but don't notice until it's gone or expensive.

• We're confronting both unprecedented scarcity and demand for energy on a timeline that's considered remarkably sudden for the usually slow-moving energy sector.

Driving the news: Higher oil prices fueled by the Iran war are the main driver behind inflation, with the Consumer Price Index rising 3.8% in April, new data out this week shows.

• Higher energy prices accounted for the bulk of the increase between March and April, Axios' Courtenay Brown reported.
• Compared with the same period a year ago, energy costs are up 18%.

Meanwhile, trouble is also lurking in our power lines.

• The nation's grid watchdog took the unusual step last week of issuing its highest level warning that exploding power demand from AI data centers could strain electricity systems.

How it works: At first glance, the Iran war and the AI boom may not seem to have much overlap.

• Oil is primarily used in transportation, after all, so most of the impact hitting the economy is through gasoline and driving.
• Data centers, on the other hand, require electricity, which is not directly impacted by the war (at least in the United States, thanks in part to ample supplies of domestic natural gas).

Reality check: Whether in our vehicles or our light switches, energy serves the same purpose: it's the engine that makes things go — or the bottleneck that mucks everything up.

What they're saying: "Whether the issue is oil-supply disruption or power-sector strain, the lesson is the same," said Jason Bordoff, founding executive director of Columbia University's Center on Global Energy Policy.

• "When energy is unavailable, unreliable or unaffordable, economies slow, public anxiety rises, and policymakers have little room to focus on anything else."

Between the lines: Even though U.S. electricity isn't directly affected by the war, power prices are going up anyway — partly due to data centers.

• Voter discontent with high power prices could collide with parallel discontent with high prices at the pump.

Friction point: High energy prices could help fuel growing populist sentiment across the country that's also being fanned by worry about AI displacing jobs.

• "Rising energy prices and fewer jobs are making it harder for people to get by and could fuel a feeling that elected officials are not looking out for their interests," Bordoff said.

Yes, but: Data centers are driving a far larger share of power growth in the United States compared to the world as a whole, according to the International Energy Agency.

The bottom line: From battlefields to data centers, the next phase of the global economy will be shaped by who has energy — and who doesn't.