As Iran War Rages, Europe Gears Up for Energy Crisis

The European Union is preparing for an energy shortfall, urging citizens to cut back on energy use amid growing concerns about supply disruptions. With the Iran conflict entering its second month, leaders are emphasizing the need for immediate action to mitigate the impact of potential shortages. Energy analysts are advocating for stronger measures and increased funding for renewable energy sources to bolster resilience.

Challenges in Energy Security

German Chancellor Friedrich Merz highlighted the severity of the situation, comparing its economic effects to those of the COVID-19 pandemic or the Ukraine war. During those periods, the EU drastically reduced Russian energy imports, and Merz warned that the current crisis could have similar repercussions. EU Energy Commissioner Dan Jorgensen reiterated the importance of conserving oil and diesel, particularly jet fuel, following discussions with energy ministers in Brussels.

“The more you can save on oil, especially diesel and jet fuel, the better off we’ll be,” Jorgensen stated, urging people to use public transport, share cars, and adopt efficient driving habits.

Rising Costs and Supply Fears

Oil and gas prices have surged by up to 70% since the US and Israel launched airstrikes on Iran in late February. Iran’s retaliation, including missile attacks and blocking the Strait of Hormuz—a critical route for 20% of global oil and gas shipments—has intensified market anxiety. The EU faces both financial and supply challenges, with von der Leyen noting that the first 10 days of the conflict already cost taxpayers €3 billion in extra fossil fuel imports.

Analysts warn that the crisis will extend beyond higher fuel costs, affecting industries like steel and cement production while increasing inflation and food prices. The Bruegel think tank’s report estimates a 100% rise in gas prices could add €10 billion to annual import costs, underscoring the urgency of action.

Competing Demands and Strategic Shifts

While the EU had previously reduced reliance on Russian energy, the war has disrupted alternative supply routes. Asian nations, which depend heavily on the Strait of Hormuz for nearly a third of their energy needs, are now vying for limited LNG supplies. The EU’s dependence on this route has grown, with 8% of its LNG imports coming from Qatar before the conflict.

Experts note that the phaseout of Russian LNG by 2027 further strains the EU’s energy options. Some leaders, like Belgium’s Bart De Wever, argue for restoring ties with Russia to secure affordable energy. “It’s common sense,” De Wever said, claiming private European leaders support the idea but hesitate to voice it publicly.

“We haven’t yet felt the full weight of the crisis,” Ana Maria Jaller-Makarewicz of the Institute for Energy Economics and Financial Analysis told DW. “But the shift in LNG shipments to Asia is already causing ripple effects.”

Path Forward

With supply competition escalating, the EU is exploring options such as gas price caps and industry subsidies. Alexander Roth, a Bruegel report contributor, warned that energy-intensive sectors could face significant strain. As the conflict continues, the bloc’s ability to adapt will determine its capacity to weather the looming energy storm.