Can Europe withstand another energy crisis?

Energy markets have been thrown into turmoil following the February 28 military strikes by the United States and Israel on Iran, sending oil and gas prices sharply higher. The surge is a particular concern for the European Union, which remains heavily dependent on imported energy.

Unlike many economic disruptions, rising oil prices have an immediate and direct impact—driving up fuel and energy costs for consumers while simultaneously increasing production and transportation expenses for businesses. An analysis published by The Conversation examines how the shock could ripple through the EU economy, focusing on the bloc’s consumption patterns and structural vulnerabilities. 

Because the EU imports most of its oil and gas, the conflict not only raises prices but also threatens supply stability. At the same time, Europe is in a stronger position than in past crises. Overall energy consumption has been gradually declining, while renewable energy output has increased. The growing use of electric and hybrid vehicles is also helping shield some consumers from immediate price spikes.

Compared to the oil shocks of the 1970s, the EU benefits from more diversified energy sources and improved efficiency. Still, the impact is expected to vary significantly across countries and sectors. The bloc’s largest economies—Germany, France, Italy, and Spain—are the biggest energy consumers and therefore the most exposed to rising costs. Road transport accounts for roughly half of oil use, while industries such as chemicals, paper, and steel are also highly energy-intensive.

The analysis draws parallels with the 2022 energy crisis triggered by the war in Ukraine, when disruptions to gas supplies pushed electricity prices higher.

At the time, the European Central Bank responded by raising interest rates from -0.5% in July 2022 to 4% by September 2023 in an effort to combat inflation. However, such measures come with trade-offs: higher interest rates can curb inflation but also slow economic growth and increase unemployment. Central banks are therefore forced to balance price stability with job protection.

Governments and EU institutions have more direct tools to cushion the blow. During the previous crisis, the European Commission introduced measures such as energy price caps, joint gas purchasing, and initiatives to reduce consumption. National governments also provided subsidies funded through borrowing.

This time, however, fiscal responses may be more constrained. Higher global interest rates and elevated public debt—especially in countries like France, Italy, and Spain—limit governments’ ability to spend. These same countries were among the most active in mitigating the last crisis and are now among the most vulnerable to another oil shock.

With energy costs rising and economic pressures mounting, the EU faces a growing risk of recession. While the situation underscores the urgency of accelerating the transition to renewable energy, the extent of the impact will largely depend on how effectively European governments respond in the months ahead.

By Nazrin Sadigova