Europe’s ability to stay sidelined in a prolonged Iran war is uncertain

For Europe, the week brought back an unwelcome memory: the kind of creeping economic dread last seen when Covid-19 tore through the continent and pushed its economies to the brink in 2020 and 2021.

“If this [Iran] war escalates into a major regional conflict,” Chancellor Friedrich Merz said at a Berlin news conference on Monday, “it could burden Germany and Europe even more than we experienced most recently during the Covid-19 pandemic or at the beginning of the war in Ukraine.”

Those two crises still loom large in EU capitals, where governments found themselves scrambling against one another for scarce medical supplies first, and then energy.

The longer the fighting drags on, the more difficult it may be for Europe to stay detached from the question of how the Strait of Hormuz might be reopened.

“Indeed, it is not their war. They did not choose it and were not consulted about it. But the impact does affect them very significantly and we can see that in terms of petrol prices and inflation in Europe and around the world.”

On Tuesday, EU energy commissioner Dan Jørgensen told ministers in an emergency video conference that Europe’s reserves remained solid, but gas prices had jumped 70% and oil 60%.

“In financial terms, 30 days of conflict have already added €14 billion to the [European] Union’s fossil fuels import bill,” he said.

Europe sources most of its oil and gas from outside the Gulf. But oil is priced on a single global market, and gas has become a competition among a growing number of buyers chasing a tighter supply.

“This situation threatens to impose further costs on our industries and our households,” Mr Jørgensen said.

“We should be under no illusion that the consequences of this crisis for the energy markets will be short-lived. Because they won’t.”

Senior EU officials urged calm, though some reacted warily when Mr Jørgensen referred to the International Energy Agency’s checklist of demand-cutting measures, including working from home, avoiding air travel and limiting road traffic through number plate rotations.

Petrol drips from a pump nozzle at a service station in Mulhouse, eastern France

By Friday, Mr Jørgensen told the Financial Times the Commission was weighing fuel rationing and the release of additional oil from emergency stockpiles.

That would require member states to keep a close watch on gas and oil reserves and to coordinate much more tightly with one another.

On Tuesday, the Commission also launched legal action against Slovakia over diesel pricing that charged motorists with foreign number plates more at the pump.

Bruegel, the Brussels-based think tank, issued a stark warning focused especially on gas.

Although the EU relies on Qatar for only 4% of its overall gas consumption and 8% of its LNG, the war is tightening supply worldwide.

Because LNG is transported mainly by ship, cargoes can quickly be redirected if another market offers a better price.

“With Qatar’s capacity offline, there is little room for the EU to diversify its import mix further,” the Bruegel report concluded.

“New LNG supplies from Australia are limited because they have historically been directed to Asian markets. Additional export capacity, primarily in the US and Canada, is insufficient to replace lost volumes fully.”

That is already feeding directly into electricity prices in Ireland and other member states that remain heavily dependent on gas.

“Higher gas prices feed into electricity prices through marginal pricing: the most expensive [power] plant needed to serve the last consumer sets the market price for all. Countries that rely more on gas for power generation, such as Italy and Ireland, are in principle more affected by surging gas prices.”

Italy, in particular, is under pressure.

Qatar cancelled a long-term LNG contract two weeks ago, forcing Rome to seek an alternative in an increasingly tight global market.

Spain, by contrast, is expected to see an average electricity price of about €66 per megawatt hour in 2026, around half Italy’s level, thanks largely to earlier investment in renewables.

Italian prime minister Giorgia Meloni has pushed for Europe’s Emissions Trading System (ETS) to be suspended, arguing that the carbon-pricing regime weighs especially heavily on Italy because of its dependence on gas. So far, however, that appeal has gone nowhere.

The European Commission’s main response this week was a proposal to halt the annual cancellation of unused carbon permits.

Instead, those permits would be shifted into a reserve fund and released when carbon prices spike.

“The Commission’s assessment is the right one,” an EU diplomat argued.

“If anything, this whole situation underlines the importance of energy independence: today it’s the Strait of Hormuz, next time it’ll be something else.

“As long as we’re so dependent on fossil fuels from elsewhere, we make ourselves vulnerable to these kinds of price or supply fluctuations.”

The Commission struck a similarly cautious note on fertiliser, frustrating the Irish Government.

One third of the world’s ammonia and urea, both critical to artificial fertiliser production, passes through the Strait of Hormuz.

Because natural gas is also an essential ingredient, the market is being hit twice over, on both price and supply.

In a twist, Irish importers had bought large stocks of fertiliser late last year before the EU’s Carbon Border Adjustment Mechanism (CBAM) came into force on 1 January.

CBAM is intended to stop European companies from buying carbon-intensive goods abroad in order to dodge the carbon costs imposed under the ETS, a practice known as “carbon-leakage”.

That means imported fertiliser, which requires large amounts of energy to produce, now carries a CBAM surcharge.

Irish officials say those reserves will last only until mid-April, after which they would cover just 60% of farmers’ needs during the sowing season.

Before agriculture ministers met on Monday, Minister for Agriculture Martin Heydon said Ireland wanted a legal route to suspend CBAM on imported fertilisers as a way to keep prices down, even if any practical benefit would most likely not be felt until next year.

Officials had hoped Europe’s agriculture commissioner, Christophe Hansen, would be receptive.

Instead, Mr Hansen stopped short of that step.

European industry, he said, had already invested heavily to reduce carbon inputs, and pausing CBAM for fertilisers would undermine those efforts while benefiting producers outside the bloc.

Speaking at a news conference on Monday evening, he said 70% of European farmers had stocked up on fertiliser before 1 January.

A farmer sprays insecticide across a field of pear trees near Lleida, Spain

For that reason, he said, there would be no immediate shock as the sowing season begins, though the picture was likely to worsen later in the year.

He said he would bring together national experts, farm groups, fertiliser importers and Commission officials on 13 April.

While a review of CBAM and fertilisers would continue, he acknowledged that a suspension “risks worsening our dependency on imports. Discussion around this will only increase the uncertainty and [that] is not going to help us.”

A Government source pushed back sharply: “If that’s the case, importers will have to go off and buy it in at the higher price. Simple as that. They’ve been holding off.”

“There was consensus [among EU agriculture ministers] around the table that there was a serious potential around the price and future supply of fertilisers. We will continue to engage with the Commission on this issue,” the source added.

Mr Hansen did say revenue generated through CBAM could be used to help “stabilising” fertiliser prices or to “limit the damage”, but for now Brussels is focused on intensifying efforts to expand domestic production and increase the use of bio-based alternatives.

One senior EU source expressed some sympathy for Ireland’s position.

“Farmers are limited as to how much bio-fertiliser they can use [due to the Nitrates Directive], so they need additional products.”

While tension may yet grow between sectoral interests and the Commission over fertiliser, and among member states over energy, US President Donald Trump’s war in the Gulf appears to have drawn European governments closer together on security and defence.

Put plainly, Mr Trump’s steady stream of taunts and insults aimed at European governments and NATO allies has only hardened attitudes that were already toughened by the Greenland episode, when European leaders signalled they were ready to contemplate both military and trade responses to his threats to seize the island by force and impose tariffs on countries that had supplied military assets to a Danish mission.

“Greenland focused a lot of minds,” a senior EU official said.

“It was too close for comfort.”

Trumpian backlash

That mood of European resistance appeared to deepen further this week.

After already denying the US military access to jointly managed airbases for missions against Iran, Spain went further and shut its airspace entirely.

On Tuesday, even Italy, generally seen as far closer to the Trump Administration, denied US bombers access to the Sigonella airbase in Sicily because, under a US-Italy treaty, any non-logistical mission would have required approval from the Italian parliament.

The episode prompted an uneasy statement from the office of prime minister Giorgia Meloni.

“Each request is carefully examined, case by case, as has always been the case in the past,” it said.

“There have been no critical issues or friction with international partners. Relations with the United States, in particular, are solid and based on full and loyal cooperation.”

Earlier in the week, France barred flights carrying military supplies from its airspace, and on Thursday Austria said it had banned US overflights in line with its policy of neutrality.

Austrians “want nothing to do with Trump’s policy of chaos and his war, which will bring us the next energy crisis,” vice-chancellor Andi Babler wrote on X.

Even so, European leaders understand there may be limits to how far they can go in provoking Trumpian anger.

The US president has stepped up his attacks over NATO’s reluctance to become militarily involved in the Strait of Hormuz.

US President Donald Trump addresses the nation at the White House this week

He has threatened to halt weapons sales to Ukraine and even withdraw from NATO altogether, a warning that led secretary general Mark Rutte to persuade several alliance leaders to jointly offer, on 19 March, to “contribute to appropriate efforts to ensure safe passage through the Strait [of Hormuz].”

According to the Financial Times, Mr Rutte placed multiple calls to Mr Trump and secretary of state Marco Rubio in the days before that statement was issued.

“Rutte is one of the few European leaders, if not the only leader, who is in constant contact with President Trump, but also Prime Minister [Keir] Starmer, [French] President [Emmanuel] Macron, [German] Chancellor [Friedrich] Merz and others to find a platform that responds to the informal requests by the United States, and also to the interests of allies and partners around the world,” Ms Lungescu said.

“He’s working the phones behind the scenes to find an off-ramp, something that can answer both the concerns of the US and those of the Europeans and others around the world.”

Still, Mr Trump kept up the pressure over Ukraine and NATO through this week.

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A visibly frustrated Emmanuel Macron warned him against issuing contradictory daily messages about the war and weakening the collective security principle at NATO’s core.

“If you cast doubt on your commitment [to NATO’s collective security] every day, you erode its very substance,” he told reporters in South Korea.

He added that any reopening of the Strait of Hormuz would require Iran’s involvement.

Yesterday, a container ship passed through the Strait after identifying itself on its Automatic Identification System (AIS) as French-owned, prompting questions over whether Iran now viewed France as non-hostile, much as Chinese vessels had been granted safe passage.

On Thursday, UK Foreign Secretary Yvette Cooper convened a virtual meeting with the foreign ministers of 41 countries, including many European and NATO allies as well as Japan, Australia and South Korea.

They agreed to coordinate whatever “political and diplomatic” efforts might help reopen the strait, but only after the fighting ends.

Even so, this is not a NATO-led process, and the Trump Administration has made no formal request to the alliance for assistance.

UK Foreign Secretary Yvette Cooper chaired a virtual meeting on the Strait of Hormuz

Next week, British and French military officials will hold a follow-up meeting at the UK’s Permanent Joint Headquarters (PJHQ) in Northwoods, outside London, after the conference call.

The effort is expected to take the form of a ‘coalition of the willing’, echoing the model discussed for Ukraine.

“It is entirely understandable why European NATO allies are reluctant to support Donald Trump’s war against Iran,” said Liana Fix, senior fellow at the European Council on Foreign Relations (ECFR).

“[However] high energy prices and the risk of migration flows from a destabilised region are real.

“If Europe stays out, it will have no influence over the outcome, undermining its ambition to be a global actor. Limited contributions, politically, diplomatically, or military, should be on the table.”

There is also little sign that Europe can simply keep its diplomatic distance and wait for the crisis to burn out within weeks.

During the pandemic, the world launched a vast and expensive race to develop a vaccine capable of beating the virus.

The Gulf war presents a different reality entirely: its main actors are pursuing narrow interests with little regard for the wider cost.

Iran’s revolutionary Islamist regime, under existential pressure, appears to have found a potent source of leverage: shutting down the Strait of Hormuz hits where Mr Trump is most vulnerable, with high energy prices at home.

Selective strikes on Gulf oil and gas facilities, which could take years to repair, create an added deterrent against future attacks by the US and Israel.

A view of the damaged B1 bridge after it was destroyed in an Israeli airstrike

So far, Iran has hit 22 vessels in the Gulf, while 2,000 ships remain stranded, according to the United Nations.

The Ras Laffan LNG complex in Qatar has been attacked, along with the Yanbu and Fujairah oil terminals in Saudi Arabia and the United Arab Emirates (UAE).

“In this environment, no ship dares pass through the strait without Iranian permission, and insurance is very expensive or impossible to obtain,” Samantha Gross, director of energy security at the Brookings Institution, wrote.

“But since the strait is not physically blocked, Iranian oil is still reaching markets, in even larger quantities than before the conflict.”

NATO and the Middle East

The fact that Mr Trump wants European and Asian militaries to deal with the Strait of Hormuz strongly suggests he fears the political cost in US lives and money could damage his standing ahead of the November mid-term elections.

“In some way or another, NATO and Allied military planners need to be involved to see what the mission would be, what would be required, who would be able to provide those capabilities, when and where?” Ms Lungescu argued.

“The answer to those questions is complicated as long as the conflict lasts.”

There has been talk that Europeans could contribute mine-sweepers, given the continent’s long experience with waters still littered by World War II mines. But removing Iranian mines from the Strait of Hormuz would be slow and hazardous work, and those vessels, effectively exposed targets, would almost certainly need US navy frigates for cover.

For all the rhetoric about NATO as a defensive alliance focused on Europe, it has maintained some form of presence in the Middle East ever since the US invasion of Iraq in 2003, a war that bitterly divided the alliance.

In 2010, NATO created a ballistic missile defence programme in response to missile threats from Iran and North Korea.

That system has been activated four times in recent weeks after Iranian missile attacks on Turkey, a NATO member.

“It’s not a matter of if, but when,” Marcin Terlikowski of the Polish Institute of International Affairs (PISM) wrote for Carnegie Europe.

“NATO allies will get involved, in one way or another, in stabilising the Middle East. And it will be neither surprising nor unprecedented.”

Five weeks of war have produced at least some hard clarity: the regime in Tehran is proving more resilient than many expected; the US and Israel were justified in treating Iran’s ballistic missile and drone arsenal as a regional threat; and Iran now understands that this threat has real force.

Yet by the logic of competing interests, none of that clarity creates much pressure to bring the war to a quick end.