The standard story of the post-World War II international economic order is not wrong, but it is incomplete. Traditional accounts tell us that the alliance between Western Europe and the United States was consolidated immediately after World War II, as a result of the Bretton Woods order, which pegged global currencies to the U.S. dollar and stabilized global economic governance via the International Monetary Fund (IMF) and the World Bank. They explain that the partnership was further strengthened by the conclusion of the Marshall Plan at the start of the Cold War and, in 1957, with the founding of the European Economic Community.

In reality, it was the three major oil shocks of the postwar period—in 1956, 1973, and 1978-79—that helped confirm the alliance between Western Europe and the United States, laying the foundation for today’s political and economic order. They also explain its fragility.

All three oil shocks were part of a broader effort by postcolonial states to use the “oil weapon” to bolster economic sovereignty alongside political independence. The three oil shocks were intertwined with a challenge to the Bretton Woods order by an emergent global majority of decolonizing states, which pushed against Western influence over the domestic economic policies of Asia, Africa, and Latin America.

The current energy crisis bookends these earlier crises by undoing the order that they helped create. The fourth oil shock marks a crucial chapter in the weakening of the United States’ geopolitical and economic power on the global stage. It has also pried apart the alliance between the United States and Western Europe—an alliance that will not be easy to glue back together.

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The first oil shock emerged in 1956, when Egypt nationalized the Suez Canal in the name of resource sovereignty. Britain, France, and Israel responded militarily, expecting a swift victory. But when Gamal Abdel Nasser’s troops filled dozens of ships with rocks, blocking the Suez Canal, they disrupted Europe’s oil supply from the Persian Gulf. What began as a display of imperial strength ended in humiliation: Britain and France withdrew, as the United States declined to support its allies. Britain and France appeared to many observers like empires on the verge of extinction.

For Western Europe, Suez was a warning and a sign of things to come. Across Africa and the Caribbean, newly independent states were rejecting colonial ties, calling for resource sovereignty, and exploring alternative forms of economic regional cooperation, from the West Indies Federation to the Union of African States.

This context is essential for understanding European integration. The 1957 Treaty of Rome is often framed as a response to fascism, but it was also a response to the threat of an emergent anti-imperial economic world order. On Feb. 20, 1957, the six founding states of the Treaty of Rome agreed to associate more than a dozen overseas territories under Part IV of the treaty, even as “associated” states were denied voting powers. This created a system of preferential trade linking Europe to its former colonies while limiting the chances of non-Western resource sovereignty and curtailing forms of economic federalism that sought to bypass Western countries.

The United States supported European integration but only fully aligned with it in shaping global economic governance after the second oil shock in 1973. That year, Egypt and Syria launched a coordinated attack on Israel to regain the Sinai Peninsula and the Golan Heights. When shipments of weapons arrived from Western powers to supply Israel, oil-producing states moved decisively. OPEC sharply increased oil prices, while OAPEC imposed export cuts and an embargo targeting Western supporters of Israel. These actions were framed as a way to change what Jamaican Prime Minister Michael Manley called “the fundamental equations of economic power.” Like Suez, they were part of a broader call for anti-imperial resource sovereignty. Venezuela—then busy with nationalizing its own oil reserves—called what was underway in both Latin America and the Middle East an “oil revolution.”

In Western Europe and North America, however, the events were known as the “oil crisis.” Oil prices surged, disrupting economies that had become heavily dependent on cheap energy. By 1970, oil had replaced coal as the dominant energy source in Western Europe.

The crisis was not just about cost of living: It was about identity. After decades of easy-access oil and growing consumption, it was outrageous to many Western observers that a ragtag coalition of Middle Eastern and Latin American states could suddenly grind life to a halt. The tensions compounded with other destabilizing trends. In 1971, the United States had begun dismantling the Bretton Woods system by ending the convertibility of the U.S. dollar to gold, leading to floating exchange rates and financial volatility. Industrial decline accelerated across Europe and North America; unemployment and economic stagnation rose. A banking crisis followed. Western Europe was officially in recession.

Amid this uncertainty, the future of the global order was unclear. In 1974, the Group of 77—a non-Western coalition of states formed at the U.N. Conference on Trade and Development—declared a “new international economic order.” They advocated resource sovereignty, fair trade, and greater autonomy for developing countries. The second oil crisis bolstered their power.

In response, Western countries deepened coordination. New institutions such as the Group of Six (later the G-7) and the International Energy Agency were created to manage economic policy and energy security outside the U.N. framework. At the same time, Europe and the United States gave Western financial institutions such as the IMF and the World Bank more power than ever before. Soon, the billions of petrodollars earned by oil producers and stored in Western banks were recycled by Western powers into starting capital for developing countries, with strings attached.

Thus was born “structural adjustment.” As imposed by the IMF and World Bank on non-Western oil-importing countries, starting from 1976, structural adjustment would allow former colonial powers to shape the internal policy choices of former colonized countries, even as it bound the decolonized world to former colonial powers through relations of debt.

According to the terms of structural adjustment loans, countries were forced to implement currency devaluation, fiscal austerity, wage restraint, and the reduction of state intervention in the economy. Resource sovereignty and economic diversification were strongly disincentivized. In addition, non-Western countries were pressured to liberalize trade and punished if they sought to establish preferential relations with non-Western trading partners.

And while Western countries staffed the highest offices at the IMF and the World Bank, African, Asian, and Latin American countries had little say. As had been the case with the European Economic Community, they were again locked into colonial economic relations and locked out of decision-making spaces.

The third oil shock, triggered by the Iranian Revolution of 1979, intensified these dynamics. Promising to fight imperialism and deliver lasting sovereignty to Iran, Iranian revolutionaries promised to rectify the 1953 U.S.-British coup that had ousted Prime Minister Mohammad Mossadegh and stalled the process of nationalizing oil in Iran. They built new regional alliances and inscribed anti-imperialism in newly written school textbooks and on the streets: the bustling capital of Tehran, for instance, became home to Patrice Lumumba Street, Gandhi Street, Bobby Sands Street, and Nelson Mandela Street, in a nod to the Islamic Republic’s anti-imperialist origin story and ambitions. The third oil crisis was born as global oil prices doubled.

As had been the case for first and second oil crises, Western powers responded quickly. In November 1979, the United States imposed economic sanctions on Iran along with trade restrictions and froze about $8 million in Iranian assets. A few years later, Western European countries rallied to the cause, casting Iran as the major destabilizing force in the region and increasing arms sales and financial flows to Iraq amid the devastating Iran-Iraq War (1980-1988).

In tandem, structural adjustment became a defining feature of global economic governance. Special economic zones became closely associated with structural adjustment programs, as did neoliberal tax-exempt tools for export-oriented production, resulting in a race to the bottom for labor wages and environmental standards. In the 1980s, Western European countries and the United States internalized neoliberal logics, trimming the social state and embracing deregulation. The devastating third world debt crisis did little to slow the process. Neoliberalism, initially forged in response to the oil shocks, had gone global, as Western Europe and the United States confirmed their leadership of the global economic order.

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We are now in the throes of a fourth oil crisis, centered on Iran. The Islamic Republic is an unpopular and brutal authoritarian regime. But it is also one whose very existence was bound up with anti-imperial activism and with the promise to bring lasting resource sovereignty to the Iranian people.

Following the joint Israeli-U.S. attack on Iran on Feb. 28, Iran closed the Strait of Hormuz, slowing oil movement and prompting the United States to impose a blockade. The disruption of energy flows and supply chains is once again exposing the fragility of the existing order.

The consequences extend beyond energy. Supply chains have been disrupted, including the flow of helium, which is essential for semiconductor production. Plans for Gulf-centered digital infrastructure and artificial intelligence development are now uncertain as investors reassess geopolitical risks, even as the Gulf states struggle to suppress any coverage of the significant damage caused by Iranian strikes—with officials in Dubai threatening up to two years in prison for anyone who dares to share a photo of Iranian missile attacks.

At the same time, the conflict is reshaping geopolitical alliances. Unlike earlier oil crises, which strengthened Western unity, the current situation is fragmenting it. It has become clear that the United States and Israel are not able to protect the Gulf from Iran’s attacks. Horizontal agreements are accordingly being negotiated everywhere one looks: Saudi Arabia and the United Arab Emirates with Ukraine, Canada with China, and European powers with independent countries in the region.

The United States faces particular challenges. Under President Donald Trump, the country has tired out its erstwhile allies, who are looking elsewhere for more reliable trade partners. Amid tariff escalation and uncertainty in trans-Atlantic trade relations, the EU finalized a long-delayed trade agreement with Brazil, Argentina, Paraguay, and Uruguay and concluded a landmark trade agreement with India. EU leaders are also exploring closer cooperation with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a multilateral trade agreement that does not include the United States.

Meanwhile, Trump’s love affair with cryptocurrencies does not offer the basis for a new global economic order: Specialists regard these currencies as highly volatile and speculative tools prone to fraud. (To be sure, the Trump meme coin is making the president and his friends a lot of money, but this is cronyism–not the dawn of a new global economic model.)

The old dollar hegemony is weakening. The IMF and the World Bank have reported a mounting inability to cushion economic damage from geopolitical shocks. The U.S. dollar’s share of global foreign-exchange reserves continues to decline as countries diversify their foreign reserves and increase gold holdings.

The trend toward “de-dollarization” has been an explicit motivation for countries in the global south—especially within the BRICS+ bloc—as they seek to expand bilateral trade in local currencies and increase reliance on tools such as China’s Cross-Border Interbank Payment System (CIPS). Since the start of the war on Iran in late February, CIPS has experienced a rapid surge in usage.

The world is moving from unipolar dollar dominance to a fragmented and partially multipolar currency order. We have seen Iran’s growing power to negotiate petroyuans as opposed to petrodollars in a bid to further weaken U.S. hegemony. (The petroyuan, since its introduction in 2018, has gained traction in Russia, Iran, and Venezuela, bolstered by the fact that China is the world’s largest oil importer.) India has also begun settling oil trade in yuan and Emirati dirhams rather than dollars. Even Washington’s Gulf allies, such as Saudi Arabia, have begun experimenting with nondollar oil sales, particularly to Asian countries.

In tandem, Israel’s political and economic status is changing. Israel is bracing for economic fallout from the war, as efforts to expand cooperation between it and the Gulf states have stalled. Trump and Israeli Prime Minister Benjamin Netanyahu’s “Project Sunrise” and “Board of Peace” initiative—aimed at creating a $112 billion special economic zone in Gaza—have faced significant implementation hurdles. And as a result of the extensive toll of the war on civilians in both Iran and Lebanon (as 2,000-pound bombs are dropped on civilian neighborhoods, belying claims of “strategic targets”), neither Israel nor the United States is gaining any long-term friends or credibility in the region.

Will a new OPEC or G-77 form—and if so, will anti-colonialism be its banner? So far, it certainly seems as though China and Iran—not Israel, and not the United States—are the winners of this war. China stands to gain, as countries seek alternatives to oil dependence. China’s star has also risen as it seeks to position itself as a peacemaker in the region.

Furthermore, the vulnerability of Gulf states to Iran’s attacks—and the fact that historically, these countries have been able to broker agreements with Iran—could lead to a nightmare scenario for Israel and the United States, whereby Iran emerges as a new regional economic hegemon that, along with China and Russia, guarantees the military and resource security of the Gulf region.

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Some analysts have said that the question of whether the war against Iran inaugurates a new political-economic order depends on its duration. This does not seem correct. If the war ends soon, Iran will doubtless be declared the victor, and the world will realign accordingly. But even if the conflict drags on with enormous cost to civilian life, it will be apparent to all that Iran was a more formidable military and economic strategic power than the United States or Israel imagined. Furthermore, China stands to benefit regardless of what happens: Its economic might and its stature as a “responsible global power” have been boosted by the conflict.

The fourth oil crisis is breaking apart the Western bloc. Great Britain, Germany, and France have refused involvement in the war, and EU leaders have emphasized the need for a negotiated settlement rather than military victory. In addition, the snowballing real-world economic and social crises set off by this war have further convinced European countries of the need to stabilize the Middle East through a realignment that bypasses the United States.

Even if a less imperialist U.S. president takes office, Washington has permanently weakened its role as the institutional anchor of the global order, undermining norms such as unconditional mutual defense, fragmenting the G-7, and weakening the World Bank and the IMF. Furthermore, European leaders are not worried about just one leader but also about future U.S. elections producing similar leaders. And as European states continue to conclude alternative alliances to circumvent the United States—both when it comes to trade and mutual defense—it will be ever more difficult to undo Western rupture. Even if the United States recommits to Europe in the future, these agreements have a path-dependency and momentum of their own.

In sum, the Western-led order that was consolidated by the three energy crises of the 20th century is coming undone by the first energy crisis of the 21st century. Whether or not this delivers a more just world remains to be seen. If Iran and China emerge triumphant, it is reasonable to assume that—at least in the short term—the world will witness the expansion of state-directed authoritarian mercantilism, characterized by the creation of new political-economic alliances that are heavily militarized and bypass the United States.

There is also a chance that a post-national global plutocracy constitutes itself, creating either a form of “techno-feudalism” or polycentric capitalism. But there is a more remote possibility too: the rise of a new transnational democratic model that prioritizes workers over capitalism, secure supply chains over low-cost production, and the centering of economic policy on environmental sustainability.

The energy crisis sparked by the war on Iran has dealt the death blow to the Western-led economic order that constituted itself in response to the three energy crises of the past century. A new international political-economic order is in the offing.