economy
April 1, 2026
"We have no reserves, no security": How severe a crisis awaits Europe?
Due to the US-Israeli war in Iran, which threatens to disrupt energy supplies, Europe faces a supply shock with the potential to paralyze production, ground planes, raise food prices and borrowing costs, and re-ignite inflation.
TL;DR
- A US-Israeli war in Iran threatens energy supplies via the Strait of Hormuz, potentially paralyzing European production and grounding flights.
- The crisis could lead to increased food prices, higher borrowing costs, and a resurgence of inflation.
- Estimates suggest the economic impact could be comparable to the COVID-19 pandemic or the start of the war in Ukraine.
- Around 20% of global oil and gas passes through the Strait of Hormuz, which Iran has threatened to close.
- The disruption affects not only oil and gas but also fertilizers and helium, crucial for microchip production.
- Rising fuel prices are already evident, with further ripple effects on various products and industries.
- Unlike past crises, this disruption impacts all energy commodities, including crude oil, gas, diesel, and jet fuel.
- Europe's initial reliance on the Gulf was estimated at 6% for oil and less than 10% for gas, but this is proving insufficient as Asian countries aggressively purchase remaining supplies.
- Markets are pricing in a short-term blockade, but a prolonged closure would lead to higher prices and a deeper crisis.
- The aviation industry is particularly affected, with jet fuel prices more than doubling.
- The chemical, steel, plastic, fertilizer, and helium industries are facing increased costs due to disrupted supply chains.
- The economic consequences could lead to stagflation, reduced economic growth, and potential interest rate hikes by the European Central Bank.
- Even if the conflict ends immediately, recovery is expected to take at least a year.