The European Union’s bid to revive its industrial base and close the gap with its global rivals may be up for its stiffest challenge yet: an escalating Middle East conflict that threatens to roil energy markets and deepen a cost-of-living crisis the bloc was already struggling to contain.
After Washington and Tel Aviv coordinated strikes on Tehran on Saturday, Iran retaliated by blocking the Strait of Hormuz, the critical artery of the Persian Gulf. The move forced hundreds of tankers carrying oil and gas to reroute, energy majors to halt production and insurers to cancel coverage.
On Monday, Qatar, the world’s largest liquified natural gas exporter, announced it would shut down its largest export facility following an Iranian drone attack, sending European gas prices soaring more than 50%.
With roughly one-fifth of global LNG supply passing through the Strait of Hormuz, a prolonged blockade will have considerable effects. For the European Union, which has been battling high energy prices since Russia's invasion of Ukraine in 2022, further spikes risk derailing plans to rejig its economy.
“The potential for this to be absolutely catastrophic on the economic and human level is very real,” Seb Kennedy, a London-based energy analyst, told reporters on Monday. “It’s a high-stake gamble that’s going on at the moment.”
The question of how to mitigate such a fallout was front and center at an emergency security meeting convened on Monday by Commission President Ursula von der Leyen, who called for an energy task force meeting as early as this week.
Meanwhile, Energy Commissioner Dan Jørgensen flew to Azerbaijan on Tuesday as part of the EU’s push to diversify its energy supply, praising the partnership with the Caucasian country as “even more important in the context of the ongoing tensions in the Middle East.”
Europe’s exposure to energy price shocks
Europe’s direct reliance on Doha is limited. With the majority of the EU's LNG now sourced from the U.S., the bloc imported a mere 8% of its supply from Qatar in 2025, down from 37% in 2017, according to London-based intelligence firm ICIS.
Yet any price increases in global commodities, such as oil and gas, is likely to hit European consumers hard, analysts said.
Italy, Belgium and Poland will be the most exposed, with Qatari LNG making up 32%, 25% and 17% of their total LNG imports, respectively.
But even more consequential, analysts agree, will be the duration of the Strait of Hormuz blockade.
Andreas Schroeder, an LNG expert at ICIS, said the global market could absorb a three- or four-day outage, but warned that “if it’s prolonged, then we will be in trouble.”
That might well happen. U.S. President Donald Trump said on Tuesday the United States was prepared for a “protracted fight” after Iran struck the U.S. embassy in Saudi Arabia, dimming hopes of a flash conflict and raising the prospects of a drawn-out war.
Barney Gray, a crude oil specialist at ICIS, told The Parliament he expected even a month-long blockade to inflict lasting damage. In that scenario, Europe would quickly import inflation from China and India — both heavily reliant on Qatari energy — as higher production costs drive up prices for consumer goods and services.
“We will see inflation start to creep up,” Gray said. “This is very bad for global growth, especially as European economies aren’t particularly robust at the moment.”
Europe’s LNG storage strain
Analysts said Europe should prepare for a potential LNG shock. Without gas flowing from Gulf countries, global spot prices could surge, pushing Europe into direct competition with Asian buyers and risking a replay of the 2021–2023 energy crisis.
“This situation might complicate refill operations in the coming months and place renewed pressure on industrial energy costs,” a Bruegel paper published this week warned, adding that “all in all, this would risk further complicating Europe’s quest to lower industrial energy costs.”
Since the beginning of the EU’s current mandate in the summer of 2024, leaders have prioritized lowering industrial energy costs and are set to advance a competitiveness agenda at a European Council summit in mid-March.
There’s an additional pressure: Europe’s gas inventories are at their lowest level since the peak of the energy crisis in 2022, standing at just 30% of capacity on Tuesday.
As the EU scrambled to shore up supplies following Russia’s full-scale invasion of Ukraine, the European Commission introduced binding storage targets requiring members to fill gas reserves to 90% of capacity ahead of November each year. In 2025, however, the bloc agreed to soften some of these rules as capitals lamented growing market speculation.
Rock-bottom storage levels have prompted experts to question whether Europe can replenish its reserves quickly enough to head into next year's winter without risking supply shortfalls.
Kennedy, the London-based LNG analyst, said the task facing European gas storage operators without Qatari gas is “absolutely immense.”
Washington takes it all
One certainty is that the biggest economic winner will be the United States — until now the world’s second-largest LNG producer after Doha.
“This incursion is a bonanza for U.S. LNG exporters, and a catastrophe for everyone else,” said Kennedy, noting that Europeans will have no choice but to hike their imports of American gas now that cheaper Qatari alternatives are off the table.
Back in January, a study by the Institute for Energy Economics and Financial Analysis warned that Brussels risked reaplacing a dependence on Russian gas with a new reliance on U.S. supplies.
Ana Maria Jaller-Makarewicz, a senior energy analyst with IEEFA and the author of the January study, noted on Monday that the U.S. is likely to supply up to 65% of Europe’s LNG imports in 2026, up from 58% in 2024.
Jaller-Makarewicz argued that the only way to shield Europe from future shocks is to replace gas and oil with homegrown renewables such as solar and wind.
“Europe is facing the biggest wake-up call to electrify since the full invasion of Ukraine,” she said.
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