Europe is facing its second major energy crisis in five years, with gas prices doubling in 2026 due to the Iran war. The continent is still recovering from the 2022 gas price shock triggered by Russia’s invasion of Ukraine, which devastated industries and raised fears of deindustrialization. Natural gas prices have surged nearly 200% since February, reaching €100 per megawatt hour, while diesel and kerosene prices have also hit record highs. The European Commission estimates that Europe’s energy import bill has increased by over €127 billion since the start of the Iran war.
The crisis is hitting energy-intensive sectors hard, including construction, fertilizers, chemicals, agriculture, and aviation. Governments across Europe have more than tripled their fiscal response to the crisis since June, spending almost €35 billion, though much of the support is poorly targeted. Spain has spent €12 billion since March to ease the impact of rising energy bills, while Italy’s gas price cap, set to begin next year, could further strain public finances.
Weather models predict a mild winter, but risks of disruptive cold spells remain. MetDesk, a UK weather forecasting company, warns of potential cold spells in December due to the early disruption of the polar vortex. Europe’s energy markets are also vulnerable to cold spells in Asia, which could intensify competition for liquefied natural gas (LNG) cargoes and boost prices further. Gas storage levels across Europe are at historic lows, with storage levels around 15 percentage points lower than the recent average and well short of the EU’s 90% target.
The political fallout of the energy crisis is already evident, with protests erupting in cities across France, Germany, and Italy. In France, the surge in energy prices is exacerbating a broader political and social crisis ahead of April’s presidential elections. The government has shifted its approach, targeting aid at those most in need, but the fiscal strain remains significant. TotalEnergies SE Chief Executive Officer Patrick Pouyanné described the European gas outlook as entering a 'dangerous period,' highlighting the world of crisis Europe is facing.