The European gas price was 40 percent higher on Monday after Qatar halted liquid gas production.
Wester van Gaal
Strikes against Iran by the United States and Israel have “reopened the most consequential energy-security issue in the global economy,” Brussels-based think tank Bruegel warned on Monday (2 March), following the bombardment over the weekend that killed Iran’s supreme leader ayatollah Ali Khamenei.
Iran produces around five percent of the world’s oil, but the stakes are far higher than its own output.
According to tanker tracker Vortexa, a total of 20 million barrels per day of oil and petroleum products pass through the Strait of Hormuz, amounting to “roughly a fifth of global consumption,” as Bruegel notes.
Crucially for Europe, all liquefied natural gas (LNG) exports from Qatar and the United Arab Emirates, equivalent to around 20 percent of global LNG trade, are shipped through the passage, which is only 39km wide at its narrowest point.
Along Iran’s shores, the Revolutionary Guard controls large numbers of missiles and drones, which it has already used to strike Dubai, Bahrain, US bases in the region, and reportedly three cargo ships.
Satellite imagery suggests shipments of oil and gas have come to a near standstill since the first strikes.
Price movements on energy markets on Monday were significant, but did not yet amount to a full-blown shock.
Oil prices were about eight percent higher than before the strikes, while European gas markets reacted more sharply, jumping roughly 40 percent by the time of writing on Monday afternoon, after Qatar halted its liquid gas production on Monday.
“So far markets are in effect betting on a short, not-too-disruptive war,” Nobel prize-winning economist Paul Krugman wrote in his newsletter on Monday, “although that could change.”
What happens next will largely depend on how long the conflict lasts and whether shipping through the Strait of Hormuz remains blocked. A prolonged standoff would erode global inventories and tighten oil and gas markets.
It would also “make Europe even more dependent on US liquid gas, with dependency on US energy imports already rising from 58 percent in 2024 to 65 percent in 2025,” said Ana Maria Jaller-Makarewicz, lead energy analyst at the Institute for Energy Economics and Financial Analysis (IEEFA).
Europe, for its part, is less reliant on Gulf oil and gas than China, India, Japan or South Korea, but as Simone Tagliapietra of Bruegel noted, the continent’s main vulnerability lies in liquefied natural gas.
If liquid gas flows through the strait continue to be blocked, Europe would be “forced” to compete with Asian buyers for flexible cargoes on global spot markets — a situation last seen during the 2021-2023 energy crisis.
That competition would likely push EU gas prices even higher.
Europe also enters this crisis with depleted gas buffers. Storage stood at 46 billion cubic metres (bcm) at the end of February 2026, down from 60 bcm in 2025 and 77 bcm in 2024.
“Lower inventories could complicate refilling ahead of next winter and add pressure to industrial energy costs if disruptions persist,” Breugel notes.
The situation inevitably invites comparisons with the 1979 Iranian Revolution, when oil exports were severely disrupted after the regime that brought Ali Khamenei and his allies to power emerged.
But the global economy today looks very different.
Economies are far less dependent on oil than they were 50 years ago, and inflation is significantly lower, two reasons the world should be “less worried” about a supply shock today, according to Krugman.
The “oil intensity of GDP” has fallen by more than 70 percent since the 1970s, meaning modern economies require far less oil to produce the same level of output.
At the same time, global finance today is more leveraged and less tightly controlled, and the Middle East, particularly Dubai, plays a much larger role in international financial flows than it did decades ago.
“To the extent that the war disrupts this new role for the region, that will be another risk to the world economy,” Krugman writes.
“I don’t want to engage in doomsaying. But I do worry that people are too complacent about the economic risks this war creates,” he added.
For European policymakers, the only logical move is more green energy, argues Bruegel’s Tagliapietra.
“Europe’s exposure to geopolitical shocks remains rooted in its continued reliance on imported fossil fuels,” he wrote.
Replacing Middle Eastern fossil-fuel supply with other sources does not “solve the security deficit,” said Pauline Heinrichs, war studies lecturer at King’s College.
“Deployment of clean, domestically-produced energy should be accelerated. Only by reducing structural dependence on oil and LNG imports can Europe durably shield its economy from recurrent external shocks.”
Europe “hasn’t learned the lesson” of the 2022 energy crisis,” said Jan Rosenow, energy professor at the University of Oxford.
“We paid €800bn in subsidies during the energy crisis; we diversified our supply and now have more LNG, but when you look at oil and gas dependency, it hasn’t gone down. We haven’t scaled [clean alternatives] fast enough and we’re paying the price for that,” he added.
“This is another wake-up call, let’s hope we won’t ignore it again,” he said.
