Europe Ditches Climate Ambitions as Iran War Drives Up Gas Prices

The ongoing Iran war is sending shockwaves through Europe's energy market, forcing the continent to scale back its climate goals and geopolitical aims.

The conflict has blocked a significant portion of the Middle East's liquefied natural gas (LNG) exports through the Strait of Hormuz, driving up European benchmark gas prices by over 60% since the start of the conflict. These prices are still below the peak seen in 2022 after Russia's invasion of Ukraine.

Despite increased renewable energy deployment and a more diverse pool of gas supplies, Europe remains heavily dependent on imports, particularly from the US, which supplied nearly 60% of the bloc's LNG in 2025. Norway, the continent's largest oil and gas producer, has already exhausted its buffer to offset lost Russian supply.

Policymakers are now considering delaying or softening climate policies designed to reduce emissions by making fossil fuels more expensive, including easing regulations around carbon pricing and renewable-deployment targets. Germany's economy minister acknowledged that the EU's energy transition over the past two decades has produced higher systemic costs, and that measures such as cutting subsidies for offshore wind could be implemented.