War in Iran: from an energetic shock, to an electrification one?

The European Union (EU) is facing the second energy shock of this decade. The first, which occurred in autumn 2021, stemmed from a surge in gas prices caused by a “perfect storm”: manipulation of Russian gas supplies, maintenance operations at Russian and Norwegian production sites, declining domestic production, and economic recovery in Asia.

The price spike following Russia’s invasion of Ukraine on February 24, 2022, then sealed the shift into a full-scale energy crisis.

The second shock originates from a single triggering event dated February 28, 2026: the blockage of the Strait of Hormuz in response to US-Israeli strikes on Iran.

While its duration remains uncertain, its magnitude must be assessed in light of the increases observed at the time: Reaching €63/MWh on March 9, gas prices doubled compared to pre-Iran strike levels. In contrast, during the 2021 gas shock, similar levels were seen in mid-September 2021, but prices continued climbing beyond €340/ MWh. Conversely, since the March 9 peak, gas prices have stabilized around €50/MWh.

In the oil market, Brent crude approached $120 per barrel, compared to roughly $60 mid-February. Prices have since fluctuated around the symbolic $100 threshold. To date, market responses remain measured, suggesting anticipation of a relatively prompt resolution to the conflict.

Should the situation persist, however, a substantial price readjustment could ensue. This would recast the current energy shock afflicting Europe as a full-scale hydrocarbon energy crisis.

Beyond mere terminology, such a reclassification would necessitate tailored policy responses, given the fundamentally distinct economic ramifications of a transient shock versus a prolonged crisis.

With an energy mix dominated by hydrocarbons – oil (38%) and fossil gas (21%) – the EU stands as an unintended casualty of the Middle East conflict. The present shock affects fossil fuel prices; prolonged duration would imperil supply itself.

Amid prevailing uncertainty, this policy brief contends that European policymakers must forthwith prioritise demand reduction and the accelerated electrification of end-uses, rather than relying exclusively on supply diversification.

Genuine European energy sovereignty will emerge not through substituting fossil fuel suppliers, but via the electrification of our economy.