How the War in the Middle East is Straining Europe's Gas Supply and Driving Prices Up

The ongoing conflict in the Middle East is significantly impacting the global energy market, particularly regarding gas and oil production. The Gulf countries, major players in the energy industry, are facing disruptions as the war has nearly halted circulation through the Strait of Hormuz—the critical maritime route for gas and oil exports. This strait is vital, as it handles approximately one-fifth of the world’s oil and liquefied natural gas (LNG). As a result of this trade disruption, gas and oil prices are on the rise. This is most critical for Asian countries; however, European nations are also feeling the pinch due to their reliance on imports. Since the onset of the Ukraine war in 2022, Europe has aimed to lessen its dependency on Russian gas, turning instead to supplies from Qatar. Yet, recent attacks from Iran have led Qatar to halt its natural gas production entirely, leaving countries like Italy particularly vulnerable to supply shortages. European countries face a gas crisis. While their oil imports from Gulf nations are relatively low, gas is more challenging to replace quickly. Gas supplies are traditionally transported via pipelines—complex infrastructures that require substantial time and long-term contracts to establish and maintain. In contrast, LNG has become a more flexible option, allowing for shipping and spot orders under shorter terms. Since the Ukraine war began, European states have been forced to seek alternative suppliers to cover the 40% of their gas needs previously fulfilled by Russian pipelines. They have made strides in this area, boosting imports from Norway, the United States, Azerbaijan, Algeria, Qatar, and the UAE. By the end of this year, the European Union (EU) plans to cease Russian gas purchases entirely. To achieve this aim, the EU has predominantly relied on LNG suppliers. The strategy hinges on the ability to diversify supplies swiftly, especially given the unstable political climates associated with many natural gas suppliers. Projections suggest that by 2025, approximately half of the EU's gas imports will be from LNG, significantly sourced from the United States and Qatar. For instance, in 2024, Italy's reliance on Qatari LNG increased, with 66% of its gas imports coming from Qatar, making it a primary supplier alongside the United States and Algeria. Italy's energy predicament is strikingly evident given how much of its gas is sourced from the Gulf. In early 2025, about 6% of the gas passing through the Strait of Hormuz was intended for Italy, amounting to 20 million cubic meters daily, nearly equal to the European total of 23 million. The impact of the Middle Eastern war poses substantial risks for Italy due to its high dependency on gas for various needs, including heating and electricity generation. Currently, Italy's gas reserves are about 50% full, providing some buffer as winter wanes. However, prolonged conflict could create serious complications if maritime traffic through the Strait remains obstructed. As Europe enters summer months, countries like Italy typically ramp up gas purchases to stockpile reserves for winter. If Italy fails to promptly secure LNG from Qatar, it risks facing supply shortages and potentially soaring prices due to ongoing geopolitical tensions. Since the war's onset on February 28, gas prices have surged by 60%, now averaging 50 euros per megawatt-hour, still lower than the peaks observed early in the Ukraine crisis. Estimates suggest that gas bills could rise by 10% and electricity costs by 15%. While the scarcity issue primarily affects Italy, the raised prices impact the entire continent. However, Italy bears a heavier burden for two key reasons: its reliance on gas for over a third of its total energy needs and the existing disadvantage of high energy costs compared to other European nations. Businesses, in particular, navigate a challenging landscape as rising energy costs further exacerbate their competitive struggles. In conclusion, the war in the Middle East has created a precarious situation for Italy and other European countries in the energy market, with the threat of rising prices and supply shortages looming unless drastic measures are taken. Related Sources: • Source 1 • Source 2