Amidst the ongoing crisis in the Middle East, a fragile truce is occasionally shattered by Iranian ballistic missiles and drones, violating the sovereignty of several nations, most notably Kuwait and the Kingdom of Bahrain.

As Iran continues its closure of the Strait of Hormuz, the European continent has been significantly impacted economically and financially. The fallout is being felt across inflation, economic growth, and energy sectors, given the region’s heavy reliance on external energy imports.

The European Investment Bank (EIB) stated that the European Union’s economy remains highly vulnerable to oil price fluctuations, particularly within the transport sector, which became increasingly dependent on liquefied natural gas (LNG) following the depletion of Russian gas supplies during the 2022 crisis (the war in Ukraine). In a report issued on April 20, the EIB noted that “natural gas is a primary source for heating, and Europe currently needs to replenish its LNG reserves after a relatively cold winter, at prices that could surge by 70% if the conflict continues.”

The report further highlighted that “high energy prices are hindering European competitiveness, as electricity prices paid by EU companies are nearly double those in the United States (226 euros/MWh compared to 139 euros in 2024).” Furthermore, EU gas prices were 3 to 5 times higher than in the US during the same year. Meanwhile, the International Monetary Fund (IMF) has downgraded its growth forecast for the Eurozone from 1.4% to 1.1% for 2026.

Fears of Continued Tensions

In a related development, the Italian Minister of Industry stated that current supply chain disruptions resulting from the Strait of Hormuz crisis are severely affecting fuel and raw material supplies coming from the region. This comes at a time of growing European anxiety over the repercussions of prolonged geopolitical tensions on the industrial and production sectors.

According to the Italian news agency “AKI,” the minister confirmed that his government has received approval from the European Commission to build Europe’s first strategic storage site for critical materials inside Italy. He explained that the project aims to secure necessary supplies for Italian and European companies in the event of an economic “shock.”

Just a week prior, the European Commission warned that the EU’s jet fuel market could experience an even tighter squeeze if the situation in the Strait of Hormuz does not improve within weeks. The Commission’s Energy Department issued an updated statement on Thursday following the latest meetings of its Oil and Gas Coordination Groups.

The Oil Coordination Group noted that the closure of the Strait of Hormuz impacts both crude oil and all major petroleum products, affecting every country within the EU. Thus far, the European Union has only experienced price impacts, without any actual supply interruptions at the consumer level.

However, the group added: “If the situation does not improve in the coming weeks, markets are expected to become tighter, especially for jet fuel.”

Potential Oil Crisis

Meanwhile, international reports are sounding the alarm that Europe faces a physical shortage of oil in the coming weeks. With the war in Iran persisting and the Strait of Hormuz remaining closed, global inventories are threatened with a potential collapse lasting through the end of 2027.

According to the Spanish newspaper El Periódico, oil markets are living under an “illusion of stability,” while inventories are plummeting at unprecedented rates not seen since the crisis of the 1970s.

In this regard, Jeff Currie, Co-CEO of Abaxx Exchange, stated that the severity of the shortage has not yet been reflected in the prices. He warned, “When the shortage hits, we will find out just how much some are willing to pay to get the last molecule of oil.”

According to Societe Generale analysts, led by Mike Haigh, even if the strait reopens by early June, it will take at least 52 days for oil transport and refining operations to return to normal. This delay means millions of barrels will remain offline, forcing refineries to rely on already near-depleted stockpiles.

Observers believe that Europe will be the hardest hit by this crisis. The “Old Continent” depends heavily on oil and gas imports, and with Hormuz closed, ships are forced to navigate around the Cape of Good Hope, adding 14 to 21 extra days for oil shipments arriving from Asia and the Middle East.

Warnings are mounting that the biggest threat is the strong resurgence of inflation across the continent. European central banks, which had been planning to lower interest rates after years of monetary tightening, may be forced to reconsider their strategies. Soaring energy prices will trickle down to all goods and services, from bread to transportation, worsening the financial strain on households and businesses.

Increase in Gas Prices

During the month of May, natural gas prices in Europe rose slightly, tracking the upward trend in oil prices. The Dutch Title Transfer Facility (TTF) benchmark gas contract for next-month delivery climbed by 0.7%, reaching 49.775 euros per megawatt-hour.

Roughly one-fifth of the world’s global oil and LNG supplies pass through the strait, making its closure a primary driver behind the surging oil prices. Before the conflict, Brent crude was trading at around $70 a barrel, whereas today it exceeds $105 a barrel.

Move to Clear Hormuz

As the crises continue to unfold, media reports indicate that Britain and France are putting the final touches on a plan to lead an international mission to clear mines from the Strait of Hormuz. This operation is planned to take place within days of the United States and Iran reaching an agreement to end the war and reopen the waterway.

According to reports, implementation requires establishing a favorable environment for military assets in the strait, reaching a final agreement between Tehran and Washington, and securing guarantees from the Revolutionary Guards that the assets will not be targeted.

In the meantime, journalist and writer Osama Al-Dalil asserted that Iran is practicing “maritime thuggery” in the Strait of Hormuz by imposing illegal control over the vital waterway that separates its territory from the Sultanate of Oman.

In his statements, he noted, “The 2015 maritime boundary agreement, ratified at the United Nations in 2016, confirms that the strait is not the exclusive property of Iran but is subject to shared sovereignty with the Sultanate of Oman.” He emphasized that closing the strait by force or laying naval mines constitutes a flagrant violation of international law.

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