The Strait of Hormuz has seen only a handful of ships sail each day, either at their own risk or escorted by the U.S. Navy, as Middle East conflicts push Europe toward a second energy crisis in five years. The choke point is doing what choke points do: reminding everyone that the continent’s comfort depends on routes guarded by warships, fragile supply chains and the price of violence passed down to ordinary people.
The pressure is building without the dramatic price spikes seen in 2022 and 2023, but the article describes a slow-motion crisis all the same. Fossil fuel costs are at historic highs worldwide, and doubts are growing over whether supply chains can withstand the strain. Europe’s rulers can call it market turbulence if they like. The result is still the same: higher bills, tighter supplies and another round of dependence on forces far beyond democratic control.
Fortress Routes, Fragile Markets
Saudi Arabia, the world’s largest crude exporter, was put largely out of action for more than a week after attacks by pro-Iran militias forced the East-West pipeline, its only alternative to Hormuz, to shut down. Reuters reported on September 24 that operations on the pipeline had resumed, with tankers awaiting loading. The temporary shutdown exposed how little margin there is in the system. One attack, one closure, and the whole arrangement starts wobbling.
The Houthi rebels, described as always dependent on Tehran, are expanding their control over Bab al-Mandab, another crucial maritime passageway. Russia, with its refineries severely damaged by Ukrainian drone strikes, is about to extend its ban on diesel exports for another month. Supplying Russia’s domestic market is now described as almost a pipe dream. A quartet of adverse factors, the article says, leaves the world on the brink of another energy crisis.
Francisco Blanch, global head of commodities and derivatives at Bank of America, said the situation has deteriorated a lot in the past two weeks since the Houthis took control of the Bab al-Mandab Strait and following the attacks on the Saudi pipeline. He said what we are seeing is unprecedented. Blanch said the disorder in the Middle East is extreme, and there is neither enough crude on the market or, above all, enough refineries available to process it. That’s the real architecture here: not resilience, but a system built to fail loudly when war interrupts the flow.
Europe’s Dependence, Europe’s Bill
The main bottleneck in spring was jet fuel, but now concerns center on diesel, mirroring what happened in the early months of Russia’s invasion of Ukraine. Moscow, a historic European supplier, has nearly half of its refining capacity offline. Riyadh has effectively disappeared from the market, with three key facilities operating below capacity — the Yanbu, Samref and Yasref refineries, all on a Red Sea now turned into a tinderbox — and has been forced to pause all crude and fuel shipments to Europe.
Blanch said neither diesel nor heating oil have much of a short-term solution. Prices, with the gallon above $6 in the U.S. and the liter over €2 in most of the EU, signal a major potential supply problem if supply chains have not been restored by Christmas. Thierry Bros, a professor at Sciences Po Paris, said the world could definitely slide into a second major energy shock in less than five years, especially Europe because of its external dependence and because fuel subsidies continue to delay electrification. He said that since Europe doesn’t have gas or oil, its only exit is to diversify and to destroy demand.
That line lands harder than the usual Brussels sermon about “resilience.” Europe’s dependence is not an accident. It’s the price of a system that treats energy as a commodity to be traded, shipped and speculated on, then acts surprised when war and blockade turn the whole thing into a hostage situation.
Blanch said very difficult weeks lie ahead. One major unknown is what will happen after the U.S. midterm elections on November 3, in which polls point to a historic reverse for the Republican Party, which may even lose both houses of Congress. He said the big question is how Trump will react and whether or not that might open the door to diplomacy. Even here, the future of Europe’s fuel supply sits partly in the hands of U.S. electoral arithmetic and presidential reaction. Sovereignty, apparently, is a slogan for speeches.
Diesel, gasoline and kerosene are largely interconnected, and refineries can choose to produce more of one product at the expense of others. That has been happening for several months, with facilities that favored jet fuel now prioritizing diesel. The result is that everything is much more expensive, and analysts consulted share the feeling that prices do not fully reflect the severity of the situation.
Blanch said one factor that could make things even worse would be Trump banning U.S. fossil fuel exports. He said U.S. consumers might benefit from lower prices, but it would do great harm to the U.S. economy, which is currently being heavily supported by those sales. Eurasia Group analysts Gregory Brew and Henning Gloystein wrote in a recent client note that the impact of such a potential veto would be particularly severe in Europe and Latin America, by far the most dependent on U.S.-sourced fuels. Samantha Gross of the Brookings Institution said real shortages may hit countries that cannot afford to pay much more for fuels.
A full-blown energy crisis has not yet arrived only because of four mitigating factors with few historical precedents. First, the world market was awash in oil before the Trump-Netanyahu duo launched the first strikes on Iran, and supply exceeded demand. Second, increasingly necessary electrification is reducing demand for gasoline and diesel. Third, strategic reserves were full, though that is no longer the case after their rapid use in the initial stages of the closure of Hormuz. Fourth, the global economy depends far less on oil and its derivatives than ever before.
No Clear Solution in Sight
The closure of Hormuz has sidelined Qatar, the world’s second-largest exporter of liquefied natural gas, which has been forced to cancel the bulk of its sales to the EU and Asia citing force majeure. Continental reserves of LNG, key for industry and heating, are at their lowest in more than a decade and about 20 percentage points below where they usually stand at this time of year. Ana Maria Jaller-Makarewicz, an analyst at the Institute for Energy Economics and Financial Analysis, said what we hope is that this winter, like the last, is not too cold in Europe, because if it is, we could have serious problems. She said Europe is facing a slow-motion crisis.
Qatar is absent from the market, flows from Norway are near their limit, and competition with Asia for LNG is much greater than a few months ago. Gross said Europe will have to pay more to attract LNG carriers originally destined for other parts of the world. Jaller-Makarewicz concluded that uncertainty is enormous and the only clear thing is that there is no clear solution in sight. That’s the neat little summary from the experts: a continent built on external dependence, now scrambling to outbid others for fuel while the routes, refineries and reserves all tighten at once.