War in Iran: the long-awaited electroshock for the European energy transition?

Six weeks into the Iran conflict, a two-week ceasefire has now been announced – offering a critical window to assess how EU Member States have responded to the surge in oil and gas prices. Our new tracker documents these responses across all 27 states. Europe’s direct reliance to Middle East supplies is modest (~11% of oil and ~4% of LNG), yet the bloc remains acutely vulnerable to the Strait of Hormuz blockade. In fact, fossil fuels still still account for 59% of final energy consumption – oil at 37%, gas at 20%, coal at 2% – amplifying the price shock across every member state.  

Several lessons emerge from our tracker:

Beyond the IEA-coordinated release of 92 million barrels from European strategic reserves, member states have largely acted alone, pursuing  national, uncoordinated measures – mirroring the fragmented responses seen during COVID and the 2021 energy crisis. To date, 22 of 27 Member States have introduced over 120 measures at a combined  cost of over €9 billion (€9.2 billion announced). This is on top of the  €13 billion  in additional costs incurred from higher fossil fuel imports costs since the conflict began. 

These measures have several characteristics. 

First, most measures are rightfully temporary, but non-targeted: of the 22 active states, 21 prioritized broad support measures, while only 11 implemented targeted assistance4. 

These measures primarily weaken price signals through either: 

• Fiscal measures (15 states): VAT/excise reductions or delayed increases for energy sectors 

• Price caps (9 States): daily limits, price cap, or maximum fuel prices 

Governments are favoring immediate, visible relief  for citizens, despite the well-documented  long-term risks : price caps suppress demand signals, creating the conditions for shortages. This pattern of costly short-termism is not new – during the previous crisis it amounted to 2.2% of EU GDP (2022-2024). Today, it rests on the assumption of a swift resolution to the conflict, which remains far from certain.  

“Although the implementation of a two-week ceasefire has been agreed, it must not give European policymakers the illusion of partially restored security, or of a return to a business-as-usual scenario.”

Alice Moscovici, Phuc-Vinh Nguyen – Institut Jacques Delors

Maritime traffic is expected to resume in roughly ten days – close to the fourteen-day truce period. Several sources have floated a possible toll of around $2 million per ship transiting the Strait of Hormuz; our initial estimates suggest this could add around $2 per barrel  to oil prices and $0.5 per MMBtu to LNG transport costs, though more recent information points to a  reduced toll of $1 per barrel for oil tankers. According to Kpler data, 172 million barrels of oil and petroleum products are currently stranded in the Gulf. LNG supply, however, is likely to remain constrained for longer: beyond vessels already carrying cargo, any meaningful easing in gas markets hinges on repairs to the Ras Laffan production site – damage the Qatari operator has indicated could take up to five years to fully address.  “Transit passage right” for hydrocarbon cargoes, meanwhile,remains largely theoretical, contingent on Iranian cooperation. Even if recent developments have taken some pressure off prices, the Strait of Hormuz disruption is unlikely to fade from energy markets for months to come.  

Without a swift return to normalcy, current measures risk entrenching consumer habituation to subsidized prices. Despite mounting budgetary pressures, governments would face strong political incentives to maintain these subsidies – withdrawing them risks of electoral backlash. In this respect, our tracker maps upcoming elections across member states, though it identifies no clear correlation between electoral calendarsand the scale of national responses. 

Second, a significant number of states (12) are moving to regulate margins in the energy sector, particularly in oil, alongside efforts to improve transparency around price formation. Five states have gone further, expressing support for a windfall tax on oil and gas company profits – echoing the EU mechanism that had been adopted in 2022, which set a minimum contribution of around 33% of profits exceeding 20% above the four-year average.  Should such a mechanism be introduced, we would recommend ringfencing the revenues exclusively for energy transition purposes. 

Third, despite calls from both the Commission and the IEA for oil demand moderation, no Member State has implemented meaningful measures to that end – though Denmark and Luxembourg have advocated for such steps domestically. Rationing is already active in Slovenia and under discussion in Italy, yet voluntary, coordinated demand reduction – crucial for easing price pressures -remains entirely untapped across the bloc. Finally, only Croatia, Spain, and France have deployed measures to accelerate the electrification of uses. 

Based on these findings, we propose the following recommendations, in line with our 17 March analysis calling for an “electroshock” to the European economy to overcome the energy crisis triggered by the Iran war. 

• Adopt a coordinated approach to demand reduction at European level 

Member States have so far acted nationally and in isolation. An emergency meeting of EU energy ministers should be convened immediately to establish a legal framework setting temporary, mandatory targets for reducing hydrocarbon consumption. Coordination is essential to prevent the spread of ‘tank tourism’ – where drivers living near borders cross into countries with frozen or lower fuel prices, such aa Poland, Slovenia, Slovakia, Bulgaria – undermining the effectiveness of national measures elsewhere.  

• Adopt national electrification plans rather than blocking prices 

Following the example of France – which is due to present an electrification plan in the coming days – and the EU, which is expected to present its own in May, all member states should adopt comparable plans. To ensure proper accountability, these plans should include full costing: both the cost of the measures themselves and their financing. They should also incorporate a sufficiency dimension in fossil fuel consumption -initially grounded in behavioral changes – provided this is accompanied by exemplary conduct from public authorities and state agents and rolled out broadly across companies in a logic of wider acculturation. This approach should take clear precedence over price-blocking measures, which we recommend ending immediately. In the interim, support should be directed toward targeted aid for the most vulnerable households and for workers who depend heavily on transport. 

• Consider a European-level windfall profit tax and dedicate all revenues to electrification

Drawing on the 2022 EU mechanism, member states could – in parallel with the ministerial meeting we recommend to gather to discuss about fossil fuel consumption targets – reflect whether to revive a similar schemeon a temporary basis. While we are not making any specific recommendation on the tax threshold or the methodology for defining a ‘typical’ windfall profit, we do recommend that all revenues be allocated exclusively tofinancing electrification plans – not to price caps or untargeted measures.