Europe faces another energy crisis as Middle East conflict exposes persistent vulnerabilities

European leaders gather in Brussels on Thursday for a summit that was supposed to focus on competitiveness and long-term strategy. Instead they will spend the day discussing emergency measures to shield voters from another energy price shock. The trigger this time is not Russia but the widening conflict in the Middle East, where Iranian retaliation against Israeli and US strikes has effectively closed the Strait of Hormuz. Around 20 percent of global oil supply passes through that narrow waterway. The closure sent European gas prices up roughly 20 percent and oil up 8 percent on 2 March, a spike that instantly revived the panic of 2022.

The Russian exit and the new dependencies

Seven months after Russia's full-scale invasion of Ukraine, Ursula von der Leyen stood in the European Parliament and declared that Europe was pivoting away from Russian gas toward "more dependable partners such as the US and Norway". The numbers show the pivot happened. Russian oil now accounts for only 2 percent of EU imports, flowing solely to Hungary and Slovakia. The bloc plans to end all Russian gas imports, including liquefied natural gas, by 2027. That is a striking turnaround from the pre-war era when Russia supplied an estimated 55 percent of German natural gas imports, feeding the chemical and automotive industries that still anchor the German economy.

But the replacement suppliers have created fresh vulnerabilities. Europe became the world's largest LNG importer in 2022. The United States now provides 57 percent of the EU's total LNG imports. Germany, the continent's industrial core, sources 96 percent of its LNG from American terminals. Norway has stepped up to become the EU's single largest gas supplier overall, delivering a third of the bloc's annual consumption and half of the United Kingdom's. The dependency on a single external actor has not disappeared; it has merely shifted from Moscow to Washington and Oslo.

Trump's leverage and the $750bn agreement

The US relationship comes with explicit political conditions. Since returning to the White House, Donald Trump has used Europe's energy desperation as leverage. In July he threatened a 30 percent tariff on all EU exports. Ursula von der Leyen flew to his Turnberry resort in Scotland and signed a commitment to spend $750bn on US oil, LNG and nuclear technologies over three years, alongside a promise of zero tariffs on US imports. Trump "reduced" his threat to 15 percent on most goods. The European Commission framed the deal as a strategic move to lessen reliance on Russian fossil fuel. Critics see a bloc negotiating from weakness, locking itself into a supplier that has already demonstrated willingness to weaponise energy access.

The dynamic was visible two weeks ago when Friedrich Merz sat beside Trump in the Oval Office. The US president berated Spain for refusing the use of its bases for strikes on Iran and threatened a trade embargo. Merz said nothing. A European diplomat, speaking anonymously to discuss the encounter freely, suggested the German chancellor's silence reflected the sputtering German economy's thirst for US energy and a reluctance to risk Trump's "reputation for vengefulness". It was, the diplomat said, "not a good look for European unity".

Strait of Hormuz closure exposes global market fragility

Europe buys little oil or LNG directly from the Middle East. That matters less than policymakers sometimes pretend. Oil and gas are global commodities priced on global markets. When the Strait of Hormuz closes, the physical supply loss is amplified by fear and speculation, and the price signal reaches Rotterdam and Title Transfer Facility within hours. Dan Marks of the Royal United Services Institute put it bluntly: "This choice between Russian energy and global market volatility is a very bad choice for Europe." He argues Europe will secure physical supply in this crisis because it can outbid poorer regions, but the cost erodes industrial competitiveness.

Marks also flags "wildcards" that European planning rarely prices in. What happens if Trump decides to reserve US LNG for domestic consumers to lower American petrol prices? What if a hurricane destroys Gulf Coast export terminals? What if the US demands European warships in the Strait as the price of continued supply? "It's a layering of risk," Marks said. "There are no easy answers here."

Norway's ceiling and the Arctic policy clash

Norway's role as the new swing supplier has hard limits. Oslo says its fields are operating close to maximum output. Raising production would require new exploration and investment in the European Arctic. That collides with EU climate policy. Brussels wants to end oil and gas development in the Arctic as part of its green transition. Norway lobbies hard against the restriction, pointing out that Russia is expanding LNG production in its own Arctic territories. The result is a policy deadlock: the EU wants more Norwegian gas but its own regulations discourage the investment needed to deliver it.

Thursday's summit: short-term fixes versus structural reform

The immediate agenda in Brussels is damage limitation. Von der Leyen told reporters this week: "It is crucial that we reduce the cost impact [from the Iran war]. We must deliver relief now… [We need] a comprehensive look at how to reduce people's energy bills." Leaders are discussing tax reviews, consumer price caps and accelerated electrification. The UK government is running a parallel exercise. Rachel Reeves has ordered Treasury officials to dust off the 2022 emergency playbook.

But the summit will also expose the fractures that have paralysed European energy policy for years. The Emissions Trading System, the EU's flagship carbon pricing mechanism covering power generation and heavy industry, is under attack from multiple directions. Italy's Giorgia Meloni demanded its "urgent suspension" for electricity production. Austria supports her. Central European members have long opposed the ETS. Spain, Sweden and Denmark argue that weakening it would punish companies that invested in decarbonisation and reward laggards. The Commission has proposed recycling ETS revenues to help struggling industries, a compromise that satisfies almost no one.

China's electrification lead and Europe's political paralysis

While European leaders argue over carbon prices, China has built an energy system designed for exactly this kind of geopolitical shock. More than 30 percent of China's final energy consumption now comes from electricity, compared with just over 20 percent globally and under 25 percent in the EU. Over half of new car sales in China are electric. The strategy was driven as much by energy security as by emissions targets: electrification reduces direct exposure to oil and gas markets that can be disrupted by conflict in the Gulf or decisions in Washington.

Europe's divisions run deeper than policy disagreements. Bart De Wever, Belgium's prime minister, broke a taboo this weekend by calling openly for normalised relations with Russia to restore cheap energy flows. "It is common sense," he said. "In private European leaders tell me I am right, but no one dares say it out loud." The hard-right Alternative für Deutschland, leading German polls, makes the same demand. Meanwhile, parts of German industry whisper the same sentiment off the record. The fracture is not just between capitals; it runs through governments and boardrooms.