WASHINGTON—With the conflict in the Gulf well into its third week, a difficult reality is setting in across Europe: Even if a cease-fire were agreed today, the continent is likely already heading toward an energy crisis.
The ongoing US-Israeli strikes on Iran, along with Tehran’s retaliation across the Gulf, have produced one of the most severe disruptions to global energy markets in decades. At the center of the crisis is the Strait of Hormuz, the most critical chokepoint in the global energy trade. Before the current conflict, roughly 20 percent of the world’s oil supply transited the strait each day. The looming threat of Iranian sea mines and missile attacks has brought commercial tanker traffic through the Strait of Hormuz to a near standstill, as some operators opt to anchor outside the waterway rather than risk passage.
While the effective closure of the strait has sent shockwaves through global oil markets, Europe’s immediate vulnerability lies elsewhere: liquefied natural gas (LNG). Approximately 20 percent of global LNG trade passed through the strait before the current conflict, much of it originating in Qatar, the world’s second-largest LNG exporter. There is no viable alternative export route for this LNG.
For Europe, the timing could scarcely be worse.
Preparation for winter starts now
Europe is entering the critical period when underground gas storage must be replenished ahead of winter. Yet European countries are beginning this process in one of the weakest positions in years. Refilling these reserves now depends heavily on LNG imports, following Europe’s rapid shift away from Russian pipeline gas following Russia’s full-scale invasion of Ukraine in early 2022. According to the Aggregated Gas Storage Inventory database, European storage levels are currently below 30 percent, a five-year low. A colder-than-average winter, combined with increased gas burn in the power sector, pushed European gas demand up nearly 7 percent since the start of the year. At the same time, pipeline year-over-year exports from the European Union (EU) to Ukraine surged more than tenfold, further accelerating withdrawals.
Under EU regulations, storage levels must reach at least 90 percent capacity by December. Given current conditions, Europe will need to inject nearly 60 billion cubic meters (bcm) of gas during the upcoming refill season just to meet this target. For context, that translates to about 586 terawatt-hours (TWh) of energy—enough to power around 57 million US homes annually, based on average household consumption data from the US Energy Information Administration. Crucially, not all gas imports can be directed into storage; much of it must first satisfy ongoing daily consumption. Even before the escalation in the Gulf, Europe’s depleted storage position was forcing it to plan record LNG imports in 2026. In 2025, European countries imported 140 bcm of LNG. While nearly 58 percent of that came from the United States, a large share also originated from the Middle East.
Further squeezing the LNG market is the March 2 Iranian drone strike on QatarEnergy’s Ras Laffan facilities, which forced an immediate shutdown of production. Two days later, the company declared force majeure, meaning that QatarEnergies is temporarily suspended from its contractual commitments of LNG shipments to customers. This declaration has added significant uncertainty to the timeline for restoring Qatari output. Even if the conflict were to end today and the strait were to reopen, full restoration of production could take weeks or even months. Markets know this: QatarEnergy’s announcement triggered an abrupt spike in European gas benchmarks, with prices jumping by more than 50 percent on March 2. It was the largest single‑day increase since the 2022 energy crisis following the Russian invasion of Ukraine and the ensuing disruption of Russian pipeline flows. These market pressures affect far more than just Europe; they risk reigniting competition between European and Asian importers for scarce LNG cargoes.
Between Asia and Europe
In the past, Asian importers dominated global LNG markets through long-term contracts with exporters, while Europe relied heavily on pipeline gas from Russia. When those flows collapsed after Russia’s 2022 invasion of Ukraine, European buyers drove LNG prices sharply higher, drawing cargoes originally contracted for Asian markets toward European terminals. This dynamic characterized the 2022 energy crisis, when Europe repeatedly outbid Asian buyers for flexible supply. The current crisis, however, may reverse that pattern. As the loss of Qatari supply tightens global LNG markets, Asian buyers may be willing to outbid Europe for available cargoes—particularly the four major East Asian economies of China, Japan, South Korea, and Taiwan. Together, these four accounted for approximately three-quarters of all LNG imported across Asia in 2025, according to data sourced from Kpler. China alone relied on Qatar for 29 percent of its LNG imports in 2025, making it the world’s top LNG importer that year.
Early signs of this dynamic may already be emerging, with reports in recent days that a US LNG tanker originally bound for Belgium changed course toward China—a potential signal that this competition for cargoes is one Europe will likely lose on cost. US LNG exports have become one of Europe’s most important diversification tools since 2022, but even if US producers increase output, it is unlikely to fully offset the loss of Qatari supply in the near term. US liquefaction facilities are already operating near capacity, and the JKM–TTF spread, the price differential between Asian and European LNG markets, has fluctuated sharply in recent months. The spread could significantly widen as Asian buyers compete for alternative supply.
The scale and cost of this supply gap are further amplified by Europe’s decision to phase out Russian pipeline gas and LNG imports by the end of 2027. The EU is set to ban short-term Russian pipeline contracts beginning in June of this year, with all remaining long-term flows required to cease by the end of September 2027. While Russian LNG accounts for a relatively small share of Europe’s supply, it remains a meaningful component: In 2025, the EU imported roughly 17 bcm of Russian LNG, representing approximately 13 percent of total gas imports. European policymakers had anticipated replacing this volume primarily with US LNG, but given the ongoing Middle East conflict, Europe’s plans to fill this gap are increasingly fragile, placing immense strain on both supply security and cost.
Back where it was in 2022
Brussels has yet to offer a meaningful solution for the energy shock. European Commission President Ursula von der Leyen has indicated that the EU is exploring measures such as the expanded use of power purchase agreements, temporary state aid mechanisms, and potential gas price caps. During the 2022 crisis, proposals for a gas price cap faced strong opposition from Germany and the Netherlands, which argued that artificially limiting prices could undermine Europe’s ability to attract scarce LNG cargoes and allow Asian buyers to outbid European importers. Today, too, similar measures are likely to face contention and stoke further divisions among the EU member states.
The current crisis has reignited a debate that emerged in 2022 regarding Europe’s energy strategy and dependence on external suppliers. From 2022 to 2024, Europe undertook an ambitious push to diversify its energy mix and accelerate the deployment of nuclear and renewable capacity. However, these efforts were partially overshadowed by reliance on US LNG and related trade negotiations, in effect trading one dependency for another. Analysts have long cautioned against this pattern of dependence, yet after years of shutting down continental energy projects, most notably the near-complete collapse of German nuclear energy, Europe now finds itself back where it was in 2022: heavily reliant on US LNG, exposed to global price competition, and bringing a policy knife to a global production gun fight. To break this cycle, Europe would need to invest more in its own production capacity. But further deployment of clean energy infrastructure or nuclear development is a multi-year process, and thus it is not a solution to the current crisis.
The Russia question
The energy shock has also reopened the question of Russian sanctions. Notably, the United States appears to be signaling a change in tone. Last week, the White House temporarily loosened restrictions to allow India to import Russian crude oil stranded at sea—a shift from what was agreed to during US-India trade negotiations in February. On March 12, the administration went further, issuing a broader temporary exemption in permitting the sale of Russian seaborne oil currently in transit. The administration’s rationale was that this will help ease pressure on global energy prices. Though framed as a short-term measure, the move underscores how quickly sanctions policy can shift under acute energy market pressure. US Treasury Secretary Scott Bessent further justified the measure by arguing that Russia taxes production rather than sales, so licensing completed shipments therefore does not provide significant financial benefit to the Kremlin. This argument is difficult to sustain: Since February 2022, Moscow has repeatedly restructured its oil and gas tax regime to maximize state revenues, and there is little reason to believe it would not do so again.
The Group of Seven (G7) price cap could tell a similar story. The mechanism works by using Western control over global shipping insurance and finance as leverage: tanker operators and insurers who want access to Western financial services must certify that the oil was sold below a set price ceiling, forcing buyers to demand a discount from Moscow. When the cap was set at sixty dollars in 2022, it was just below the market price for Russian oil. But Russian crude has since fallen well below that level, meaning the cap no longer constrains prices. In response, the EU and the United Kingdom lowered their ceiling to around forty-seven dollars to restore its bite, but the United States declined to follow, creating a gap that operators can exploit, and particularly undermining the EU’s move. The Trump administration has never been enthusiastic about the mechanism, and a decision to stop enforcing it entirely cannot be ruled out. If that happens, then one of the few remaining tools limiting Russian energy revenues effectively collapses.
So far, European leaders have mostly remained firm in their commitments to diversify away from Russian energy. On March 11, von der Leyen warned that returning to Russian energy would be a “strategic blunder” that increases Europe’s vulnerability. At a recent meeting, French President Emmanuel Macron, German Chancellor Friedrich Merz, and Italian Prime Minister Giorgia Meloni joined other Group of Seven (G7) leaders in rejecting calls to ease sanctions despite the turmoil in global oil markets. Merz has also publicly criticized the US decision to temporarily lift sanctions, calling it “wrong.” However, Belgian Prime Minister Bart De Wever broke openly with the EU’s agreed position this past weekend, arguing that Europe “must normalize relations with Russia and regain access to cheap energy.” He added that European leaders privately agree with him but are unwilling to say so publicly. Hungarian Prime Minister Viktor Orbán remains another strong European voice publicly urging a reconsideration, though his position carries little weight among his peers because of his long-standing alignment with Moscow.
Could the EU extend the window of continuing Russian supply past the current deadlines? Perhaps, but doing so would require reopening a complex political and legislative process between the Commission, the European Parliament, and the Council. Even under accelerated or emergency procedures, such a move would be politically fraught. In practice, this would mean revisiting the sanctions architecture that has been painstakingly constructed since 2022. Beyond the legal and institutional challenges, such a move would undermine the EU’s geopolitical strategy and effectively finance Russia’s continuing war in Ukraine. For Brussels, this option remains politically untenable. But pressure from individual member states may continue to intensify if prices rise sharply.
The European dilemma
What this conflict has made clear is that while higher oil prices will raise energy costs globally, Europe’s more immediate challenge is securing sufficient LNG cargoes to refill its depleted gas storage. Toward this end, the calendar is working against European importers. With the refill season running from April to November, losing even two months to a Qatari production halt means forfeiting roughly 25 percent of the injection window before a single additional cargo arrives. European countries could attempt to suppress demand for gas through conservation measures and reduced industrial energy consumption, though the scale required would be politically and economically difficult to sustain.
More realistically, European buyers will be forced to wait until Asian demand is satisfied, and then pay whatever price remains. Unlike emerging market economies, which may be priced out entirely, Europe has the financial depth to outbid most competitors. But that calculation carries its own cost: securing supply at any price means passing that cost onto households and industry, with all the economic and political consequences that follow.