United States President Donald Trump’s decision to strike Iran, pursue regime change and reshape the balance of power in the Middle East has revived a formidable ghost that the European Union thought it had managed to banish for good: energy crisis.
The spiralling war has sent gas prices soaring, prompting panic among investors and anxiety among governments.
On Tuesday, gas prices at the Title Transfer Facility (TTF), Europe’s benchmark trade hub, closed at €54.3 per megawatt-hour (MWh), a striking rise from €31.9 MWh on Friday, the day before Trump gave the go-ahead for the first strikes on Iran.
The sudden hike has been fuelled by a convergence of troubling events, most notably Qatar’s decision to halt production of liquefied natural gas (LNG) in the wake of Iran’s retaliatory strikes. Qatar is one of the world’s main LNG suppliers.
The effective closure of the Strait of Hormuz, a vital energy export route from the Middle East, and Trump’s confidence in the US military to continue the barrage “far longer” than his projected five weeks have further rattled markets.
EU leaders are already on high alert. Rob Jetten, the new prime minister of the Netherlands, said his government would be ready to take extra measures “if necessary”.
“The Iran war can have a big impact on strategic reserves, not only in Europe but also in Asia. So we have to prepare ourselves for any case that this war will continue for many more weeks and impact the strategic reserves in the Netherlands and abroad,” Jetten said on Tuesday on his first trip to Brussels since taking office.
“I think the broader concern is what this war and everything that’s going on in the Strait of Hormuz is going to affect in terms of pricing.”
Spain’s Pedro Sánchez, whose country enjoys some of the cheapest energy bills on the continent, said his executive was looking into “scenarios and possible measures to help households, workers, businesses and the self-employed, and thereby mitigate the economic impacts of this conflict,” should the situation worsen.
Meanwhile, French President Emmanuel Macron announced in a televised speech that he would seek to build an international coalition, with military resources, to safeguard maritime traffic in the Strait of Hormuz, the Suez Canal and the Red Sea.
“We have economic interests to protect because oil prices, gas prices, and the international trade situation are profoundly disrupted by this war,” Macron said.
In Brussels, EU officials insist the bloc remains well supplied because the majority of its LNG imports, about 58%, come from the US, with Qatar providing just 8%.
If the war in Iran stretches over time and production in Qatar remains halted, countries like China, South Korea, Japan and India, the main consumers of Qatari LNG, will have no choice but to turn to the US in search of a substitute.
An increase in competition for US-made LNG would pit Europe against Asia in a frantic bid and drive prices to unpredictable heights.
The shutdown in Qatar “will have a substantial ripple effect on the global LNG market until production is restored, and it’s unclear at this stage when that could be,” said Baird Langenbrunner, a research analyst at Global Energy Monitor.
“This is yet another opportunity for Europe to get more serious about electrification and renewables,” Langenbrunner added. “Exposure to these geopolitical shocks will continue until it is less dependent on gas.”
Ghosts of 2022
Inevitably, the upheaval in the markets has brought back painful memories of 2022, when Russian President Vladimir Putin decided to cut off gas supplies in retaliation for the sanctions imposed over the full-scale invasion of Ukraine.
Back then, the EU was structurally dependent on Russia’s low-cost pipeline gas, so the abrupt stoppage precipitated a record-breaking surge in prices, with a 231% jump in the Czech Republic and 165% in Romania.
As governments rushed to refill their underground storage in the summer, the TFF entered double-digit territory, hitting an astonishing €348 MWh one day in August.
It was a full-blown energy crisis. Widespread blackouts and mandated rationing were no longer far-fetched scenarios, but real-life possibilities.
Staring into the void, the European Commission invoked Article 122 of the treaties to quickly approve a raft of emergency regulations, including an unprecedented plan to reduce gas consumption and a divisive mechanism to artificially cap prices.
Member states rushed to build LNG terminals to receive vessels from the US, Qatar, Norway, Algeria and Nigeria, paying whatever was needed to keep the lights on. Germany, whose economy had been configured around cheap Russian gas, put together its first-ever floating LNG terminal in just 194 days.
Renewable systems, in particular heat pumps, were vastly expanded, and solidarity agreements were struck to avoid devastating shortages.
But the greatest effort went directly into consumers’ pockets. After the Commission eased rules on state aid, governments began to massively inject billions in direct support for industry and households to offset the prohibitive bills. The spending spree inflated public debt, but shielded the general population from wintertime hardship.
While the EU succeeded in preventing the worst-case scenario, the aftermath of the energy crisis is still felt today: gas prices never returned to pre-2022 levels, creating a new normal that has left Europe lagging behind the US and China.
The competitiveness gap, with the EU paying more than double for electricity compared to America, is now at the very top of the political agenda, with mounting pressure on Brussels to reverse the trend and catch up before it is too late.
Patience is wearing thin in European capitals, many of whom have pointed their fingers at environmental laws as an obstacle to lower energy prices. Italy recently called for the suspension of the Emissions Trading System (ETS), the bloc’s flagship instrument to put a price on pollution and encourage the transition to renewable sources.
The Commission, which is due to revise the ETS this summer, has countered the backlash by arguing that low-carbon energy is the only viable solution to remove dependency on imported fossil fuels and vulnerability to external shocks, as is the case now with the war in Iran.
However, EU officials stress that 2026 is unlike 2022. Back then, the crisis was triggered by a supply crunch manufactured by Putin. The bloc had to scramble to find alternative providers and build LNG infrastructure overnight. Today, the supply chain is more diversified and gas consumption has diminished.
The main concern now is pricing.
“The closure of Qatari LNG facilities and disruption in the Strait of Hormuz are affecting a large chunk of global LNG supply,” said Elisabetta Cornago, an assistant director at the Centre for European Reform (CER).
“Asia is more dependent on this region’s LNG supply than Europe as a whole, but if Europe won’t feel the impact in terms of immediate gas shortage, we are heading into storage refilling season, so high prices will raise the cost of those operations.”
Under the marginal system, the final price of electricity is set by the cost of the last, most expensive generator required to meet demand, which in this case is gas. In 2022, some countries forcefully advocated for “decoupling” electricity prices from gas, but the idea of fundamentally revamping the free market proved too much for others.
Last month, the Commission pledged to present “different options” to rethink the bloc’s market design, which was revamped in 2024. The war in the Middle East and its ripple effects might nudge Brussels towards the next frontier.
“The increase in TTF gas prices has been swift, but in terms of magnitude, we are far away from the price spikes observed in 2022,” Cornago added. “How that will evolve will depend on the duration of the war, which is highly uncertain.”
Marta Pacheco contributed reporting.
