The United States and Israel’s conflict with Iran has triggered the most significant disruptions to global energy markets since Russia’s 2022 invasion of Ukraine. Given Europe’s reliance on Middle Eastern fossil fuel imports, the attacks that began 28 February and drove a prolonged closure of the Strait of Hormuz have direct implications for the European Union’s (EU) inflation and growth trajectories, industrial competitiveness agenda, and other legislative priorities ranging from trade to sustainability.
For the EU, the leap in oil and gas prices delivers a stark reminder of the bloc’s dependence on both fossil fuels and energy imports generally. In recent months, discussion of the green transition has increasingly had to compete with concerns about debt pressures, defence spending, and inflation. This energy crisis is likely to alter that balance. Rather than allowing sustainability to slip further down the EU agenda, the shock is likely to reinforce the view that the green transition, competitiveness, and economic sovereignty are increasingly inseparable.
The shock is familiar but sharper
The blocking of the Strait of Hormuz meaningfully and swiftly constrained fossil fuel supplies amid persistent global demand, forcing prices upward. Daily flows through the Strait normally amount to roughly one-fifth of global consumption in oil and petroleum products. On 2 March alone, European gas prices rose 20% while prevailing oil prices rose 8%. Moreover, diesel for transporting manufactured goods, jet fuel for flights, and fertiliser chemicals for food were all victims of the conflict. The risk premium from uncertainty – as demonstrated by the Strait opening on 17 April just to close again the next day – further feeds into higher prices.
Fatih Birol, head of the International Energy Agency (IEA), has stated that the current crisis is more serious than the ones in 1973, 1979, and 2022 together. The March 2026 2.8% EU inflation reading likely captured only the initial phase of a conflict that was still ongoing in late April. European Central Bank (ECB) President Lagarde specifically noted that the scope of the crisis would need to be better calibrated before monetary policy could respond; slower growth amid faster inflation presents two competing challenges for central banks. Even if the conflict de-escalates soon, the inflationary effects are likely to linger and continue shaping political sentiment across Europe.
Why this conflict strengthens the energy transition agenda
The closure of the Strait is likely to cause a shift in how the green transition is framed at EU level. Russia’s invasion of Ukraine had already forced a reckoning with Europe’s dependence on imported fossil fuels. While the 2024 EU election gave the Commission a clear mandate to prioritise competitiveness and defence, the escalation in the Middle East is a powerful reminder that diversified, greener sources of energy are now likely to go from being treated as “nice-to-have” climate measures to being viewed as necessary instruments of resilience, affordability, and sovereignty.
That view is also consistent with public sentiment. A European Pulse survey conducted for POLITICO and deBartlet in March found support of roughly 93-95% for Europe producing more of its own energy, developing its own energy companies, and investing more in energy infrastructure, though views are split on just how quickly to pursue such aims. Per the European Commission’s DG ENER, resilience to future energy crises would require a better integrated energy network, further electrification, and more diversified energy supplies.
The inflationary consequences of the crisis can be expected to broaden the coalition in favour of sustainability-oriented policy. Some who previously criticized the green agenda as detrimental to affordability may now see domestic clean energy investments as part of the answer.
Implications for the EU policy agenda
The ongoing crisis is effectively accelerating the need for the EU to treat competitiveness and sustainability as facets of the same structural problem rather than separate policy tracks. This realignment is most evident with the Industrial Accelerator Act (IAA), where surging energy prices are now creating visible tension with the Act’s core aims around growth and competitiveness. This tension is opening a period of heightened political fluidity around the IAA’s design, one in which the balance between industrial support conditionalities, energy cost relief, and domestic production incentives remains actively contested. For stakeholders in sectors such as electric vehicles (EVs) and clean technologies, the debate raises fundamental questions about whether European preference frameworks can simultaneously advance sustainability objectives and deliver on competitiveness. How policymakers resolve that tension will shape the terms on which industrial support is allocated across the bloc.
The potential revaluation of the legislative agenda also extends to the digital realm, which encompasses some of Europe’s most energy-intensive growth bets. In a geopolitical context defined by energy prices and supply chain security, the energy footprint of digital infrastructure (including AI data centres) is increasingly entering mainstream policy conversations. The upcoming Cloud and AI Development Act (CADA) is likely to be shaped by this broader context, as legislators balance the EU’s ambitions in digital competitiveness with evolving expectations around energy resilience and efficiency. More broadly, the relationship between industrial energy consumption and consumer energy costs is becoming a live question in several regulatory debates, and digital infrastructure operators will want to monitor how that framing develops across relevant legislative files.
The Commission is already taking action, including calling for Member States to consider a Temporary Crisis Framework that among its measures could raise the intensity of state aid permitted under the state aid framework associated with the Clean Industrial Deal (CISAF). On 22 April, the Commission also released a raft of emergency ‘AccelerateEU’ measures focused on coordination, preparedness, and providing short-term solutions to support immediate responses to the ongoing crisis.
Beyond the aforementioned files, the logic of energy security is likely to further permeate the broader legislative landscape. There is potential for the Commission to push for additional climate resilience and clean tech measures under the umbrella of the ongoing ReArm Europe Plan/Readiness 2030, while energy-related legislation generally moves towards favouring a more diverse mix including renewables and potentially nuclear as stabilizers for the industrial grid. On the trade and investment front, there is also potential for greater pragmatism towards EU treatment of Chinese green technologies such as batteries and EVs; the EU may become more open to allowing more imports or local manufacturing to promote greater affordability. In this shifting environment, stakeholders have a critical opportunity to lead the debate on how energy security and sustainability can best be integrated within the EU’s evolving priorities.
Conclusion
The Iran war and resulting energy crisis are positioned to leave a deeper mark on the EU agenda than a temporary commodity shock would suggest. The crisis has reinforced an existing trajectory in Brussels: towards a closer alignment on sustainability, competitiveness, and economic sovereignty. What is likely to change now is the breadth of support for this agenda. The political case for energy transition is no longer just about climate objectives; it is increasingly about inflation management, industrial strength, and resilience to geopolitical risk.
For stakeholders, the message is straightforward. The EU is unlikely to retreat from its competitiveness push, but that agenda is being reshaped under conditions of energy-driven cost pressures. Organisations that can align themselves with Europe’s demand for cleaner and more resilient growth will be better positioned. Those that continue to frame the green agenda and the competitiveness agenda as opposing forces may find it challenging to build consensus and support in Brussels.
By Edward Logan
