European gas prices have surged by approximately 70% following the outbreak of war in Iran and the subsequent effective shutdown of transit through the vital Strait of Hormuz, a key route for global crude oil and liquefied natural gas supplies.

EU Assessment and Response

EU Energy Commissioner Dan Jorgensen, ahead of a meeting of EU energy ministers, ruled out a security of supply crisis but acknowledged a severe price crisis that cannot be neglected. The EU's planned response involves targeted, short-term measures rather than structural changes to the energy system. Measures under discussion include a gas price cap, better utilization of Purchase Power Agreements and contracts for difference, and state aid.

Context and Preparedness

The current situation follows the major supply and price shock experienced during the Ukraine war in 2022, which led to an EU pledge to phase out Russian fossil fuels by November of the following year. Commissioner Jorgensen noted that the EU is now better situated to handle the price surge due to the increased build-out of renewable power capacity.