Iran war triggers European energy scramble as prices surge 70 percent

Two months into a war that has shut the world's most important oil chokepoint, Europe's energy ministers gathered in Brussels to hear a message they have delivered before: use less. Commissioner Dan Jorgensen told the 27 member states that citizens should fly less, drive less, work from home and share cars. The International Energy Agency's playbook, dusted off for the third time in five years, was officially back in play.

A supply shock, not just a price spike

The numbers are stark. Since the first US and Israeli strikes on Iranian targets in late February, benchmark oil and gas prices have climbed as much as 70 percent. Iran's retaliation, missile barrages on Gulf energy infrastructure and a blockade of the Strait of Hormuz, has removed the passage used by one-fifth of the world's seaborne oil and liquefied natural gas. Qatar's Ras Laffan complex, the single largest LNG export facility on the planet, was hit on 18 March. State-owned QatarEnergy says the damage is extensive and repair could take months or years.

Ursula von der Leyen put a price tag on the first ten days alone: €3 billion in extra fossil fuel import costs for European taxpayers. Bruegel, the Brussels think tank, calculates that if gas prices merely double and stay there, the bill over the coming year reaches €100 billion. That is before any physical shortage materialises.

Why Europe cannot simply buy its way out

On paper, the EU looks less exposed than Asia. Only 8 percent of the bloc's LNG came through Hormuz from Qatar before the war, whereas Japan, South Korea and China rely on the strait for nearly a third of their consumption. But the market is global. As Asian buyers bid aggressively for replacement cargoes, several LNG shipments originally destined for European terminals have already been diverted. The United States, now the EU's single largest gas supplier, is seeing its export capacity stretched by the same Asian demand.

Compounding the squeeze, the EU's own legislation phases out Russian LNG imports entirely by 2027. That volume, roughly 15 billion cubic metres last year, has no immediate replacement. Jorgensen was unambiguous after the ministers' meeting: the EU will "not import one molecule" of Russian energy. The line drew a public dissent from Belgium's prime minister, Bart De Wever, who told L'Echo that the bloc must "normalise relations with Russia and regain access to cheap energy," adding that other leaders agree privately but will not say so on the record.

Industry feels the heat first

The pass-through from wholesale markets to factory gates is already visible. Fertilizers Europe warned in mid-March that the crisis threatens fertiliser supply chains and, by extension, food security. The lobby group asked the Commission to consider direct assistance to farmers and support for the resilience of Europe's fertiliser industry. Energy-intensive sectors, steel, cement, chemicals, plastics, aluminium, glass, face the same cost curve. Lufthansa has reportedly drawn up plans to ground dozens of flights if fuel costs keep rising while demand softens.

Alexander Roth of Bruegel identifies the political temptation: cap gas prices to shield voters and industry. The think tank's latest report calls that a mistake. "This would be a mistake," it states, arguing that suppressed prices weaken the signals that drive efficiency, demand reduction and clean-energy investment. In the short term a cap offers reprieve; in the medium term it raises consumption and delays the exit from fossil fuels.

The case for mandatory demand reduction

Jaller-Makarewicz, watching from London, says the EU has not yet grasped the magnitude. "We haven't yet realized the magnitude of the crisis," she said. She expects Europe to "start feeling the difference" within a month. Her prescription is concrete: mandatory temperature limits in restaurants and government buildings, travel restrictions for public officials, and a rapid redirect of capital toward domestic green industries such as heat pumps. Roth offers a fiscal lever: cut taxes on electricity rather than subsidising gas. That lowers bills while making heat pumps and electric vehicles comparatively cheaper, accelerating the structural shift the price cap would retard.

Spain and Italy: a tale of two dependencies

Bruegel points to Spain as evidence that renewables deployment pays off in crisis resilience. Heavy investment in wind and solar has allowed Spanish wholesale prices to decouple partly from gas benchmarks. Italy, by contrast, remains Europe's most gas-reliant major economy and was the largest importer of Qatari LNG via Hormuz. Italian industrial users have seen some of the sharpest price increases on the continent this year. The divergence underscores a point the Commission has made for years: electrification powered by domestic renewables is not just a climate policy, it is a security policy.

No quick return even if shooting stops

Jorgensen's closing remark at the emergency council was deliberate: "Nobody knows how long the crisis will be, but I think it's very important to underline that it will not be short. Energy infrastructure in the region has been and continuously is being ruined by the war." Even a ceasefire tomorrow would not reopen Ras Laffan or guarantee safe passage through Hormuz. The physical damage, the insurance rates, the rerouted shipping, all persist. Europe's next winter will be priced on that reality.