Ahmed Kamel – Egypt Daily News
The surge in global energy prices triggered by the war involving Iran is exposing what European leaders increasingly describe as one of the continent’s most serious vulnerabilities: its dependence on costly and volatile energy supplies.
Speaking before executives from major heavy industries during an economic summit in Antwerp last month, French President Emmanuel Macron acknowledged the problem bluntly. Under the glass-and-steel roof of the historic exchange hall, he told the packed audience that Europe’s persistently high energy prices represent a “point of weakness” for the continent’s economy.
Even before the conflict in Iran pushed global oil and gas prices higher and disrupted key fossil fuel supply routes, energy costs were already a major concern across Europe. Electricity prices in the region remain significantly higher than those in the United States and China, forcing some factories to shut down as operations become economically unsustainable.
Major industrial companies, including the German chemical giant BASF SE, have repeatedly warned that the continent’s industrial competitiveness is at risk if energy prices remain elevated. Steel manufacturers and other energy-intensive industries have voiced similar concerns, while policymakers worry that Europe’s economic ambitions could be undermined by the persistent cost disadvantage.
War drives new surge in costs
The war in the Middle East has added new urgency to the problem. This week, European natural gas prices climbed to their highest level in three years, reflecting fears of further supply disruptions and intensifying competition for fuel on global markets.
According to calculations by the climate policy think tank Strategic Perspectives, the recent surge in gas prices alone may have added at least €1.3 billion, roughly $1.5 billion to Europe’s energy costs.
Although prices remain far below the levels reached after the Russian invasion of Ukraine in 2022, the latest spike is renewing concerns among European governments and industries already struggling with high costs.
“This is happening at a very bad time,” said energy researcher Anne-Sophie Corbeau of the Center on Global Energy Policy in Paris. “We are extremely exposed to global energy markets both in terms of price and supply.”
She added that many industrial companies are likely reacting with frustration after years of energy instability.
“Industry will think: not another crisis. There are no magic solutions.”
Policy debate intensifies
The latest shock is fueling intense debate within the European Union about how to reduce energy costs while maintaining climate goals.
Some proposals under discussion include cutting energy-related taxes or slowing certain environmental policies that critics say increase costs for industries. Others warn that weakening climate policies could undermine Europe’s long-term strategy of reducing dependence on imported fossil fuels through the expansion of renewable energy.
In Brussels, the seriousness of the situation is becoming increasingly clear. During a recent meeting, senior European Union officials reportedly warned member states that the energy challenge highlighted by the Iran conflict represents an “existential issue” for the bloc.
European leaders are expected to address the issue during a summit scheduled for March 19, where they will ask the European Commission to propose measures aimed at lowering prices and protecting key industries.
Industry reconsidering Europe
Decisions being made inside corporate boardrooms suggest the pressure is already reshaping Europe’s industrial landscape.
Energy-intensive companies are slowing investments, delaying projects aimed at reducing carbon emissions and in some cases shifting production capacity to regions with cheaper power.
The chemical company Versalis, a subsidiary of the Italian energy group Eni, has begun closing several plants, highlighting how energy-intensive sectors are reconsidering whether Europe remains a competitive place to operate.
According to BASF chief executive Markus Kamieth, the continent is losing industrial capacity at an unprecedented pace.
“Europe is losing industrial capability faster than we have ever seen before,” he said.
Rising demand adds pressure
Europe’s challenge is compounded by rapidly growing energy demand in the years ahead.
The European Union is attempting to maintain industrial competitiveness, expand defense capabilities and support emerging technologies such as artificial intelligence, all of which require massive amounts of electricity.
Research from BloombergNEF projects that Europe’s final electricity demand could rise by 57 percent by the end of the decade compared with 2024 levels. Electric vehicles are expected to drive much of that increase, followed by the rapidly expanding number of data centers required to support artificial intelligence.
Estimates from the European Commission point to similar trends, although some analysts warn that the energy demands of AI computing may exceed current projections.
Dependence on global gas markets
After losing much of its pipeline gas supply from Russia following the Ukraine war, Europe has increasingly relied on liquefied natural gas transported by sea.
While that shift helped replace Russian energy imports, it also exposed the continent to global price fluctuations and supply disruptions.
Competition for LNG intensified further after a major Qatari liquefied natural gas facility was targeted in a drone attack attributed to Iranian forces, highlighting how geopolitical instability can rapidly influence global energy markets.
European Energy Commissioner Dan Jørgensen said the conflict’s broader market impact is now the main concern.
“The problem is not just supply disruption itself,” he told Bloomberg Television. “The biggest issue is the effects on global markets, and of course those effects also hit consumers in Europe.”
Defense and energy demand
Energy security is also becoming increasingly linked to Europe’s military ambitions.
During the recent Munich Security Conference, energy infrastructure emerged as a key topic as governments discussed increasing defense spending and preparing for future security threats.
The European Parliament has warned that the defense sector itself is becoming increasingly energy-intensive, as modern warfare relies heavily on technologies such as drones, digital networks and cyber systems.
According to NATO adviser James Appathurai, future armed forces will depend more heavily on electricity as hybrid technologies and drone fleets become standard.
“We need to make sure power grids can handle the arrival of 20,000 NATO troops in a single day,” he said. “Right now, many grids cannot even accommodate the production facilities that have already been approved.”
Green ambitions under pressure
Europe’s high energy prices are not a new issue. In a major report published in 2024, former European Central Bank president Mario Draghi warned that expensive energy had become a structural obstacle to economic growth.
According to the report, high energy costs are hurting investment sentiment among companies and limiting Europe’s competitiveness compared with other major economies.
The European Union’s long-term strategy relies heavily on a rapid expansion of renewable energy, particularly wind and solar power, which have relatively low operating costs.
But some analysts argue that Europe’s green ambitions may prove difficult to achieve quickly enough to meet rising demand, especially as artificial intelligence and data centers require ever greater computing power and electricity.
Swedish Energy Minister Ebba Busch warned that the challenges could become even more severe if energy infrastructure does not keep pace with technological development.
“If we already have problems with electricity and our energy system today, they will grow enormously when AI production expands across the European Union,” she said.
“If we do not manage this properly, there will be a first-tier and second-tier group when it comes to artificial intelligence.”
As Europe searches for solutions, some governments are now calling for temporary changes to climate policies. Italy has urged the EU to suspend the bloc’s emissions trading system, which places a price on carbon emissions.
Others strongly oppose such moves, arguing that the only long-term path to energy security is reducing dependence on fossil fuels entirely.
“There is a huge wave of nostalgia for fossil fuels in Brussels,” said European Parliament member Thomas Pellerin-Carlin. “But the only way to achieve energy security is to move away from them. Otherwise, we will remain dependent.”
