The European Union faces pressure to scale back climate policies as the Iran conflict, now in its fourth week, drives gas prices up over 60% to above 50 euros per megawatt hour. With the Strait of Hormuz largely blocked, Europe has lost approximately 8% of its liquefied natural gas supply from the Middle East. Iranian strikes damaged Qatar’s Ras Laffan LNG complex, eliminating 17% of its capacity. Germany’s energy minister Katherina Reiche acknowledged the EU “overestimated sustainability” and “underestimated affordability,” signaling potential rollbacks of carbon pricing, renewable targets, and emissions regulations to prioritize energy security over climate goals.
In-Depth:
(Reuters) – The European Union may be forced to scale back its flagship climate policies and geopolitical aims as the Iran war drives up energy prices – with lasting consequences for the bloc’s energy strategy. The energy crunch sparked by the conflict, now in its fourth week, has rattled Europe, which is heavily depconcludeent on imported oil and gas. Around 8% of its liquefied natural gas (LNG) comes from the Middle East through the all-important Strait of Hormuz, which remains mostly blocked. European benchmark gas prices have jumped more than 60% since the conflict launched, to above 50 euros per megawatt hour. That is still far below the eye-watering peak of nearly 300 euros per MWh seen after Russia’s invasion of Ukraine in 2022, when pipeline gas supplies collapsed.
That earlier supply shock triggered a roughly 20% drop in consumption as governments imposed energy-saving measures and factories shut down in the face of uncompetitive power and gas costs. While the EU has sharply expanded renewable energy deployment since then, with wind and solar generating more electricity than fossil fuels in Europe for the first time in 2025, gas still accounts for around a fifth of the bloc’s total energy consumption, reflecting the fuel’s dominant role in heating and industest.
Europe has also dramatically reduced its exposure to Russian energy, but it has instead become heavily depconcludeent on the U.S., which supplied nearly 60% of the bloc’s LNG in 2025, according to Kpler data. Russia was the second-largest source at 13%.
So even though Europe’s gas market today sees very different than it did in 2022, these depconcludeencies mean it is no less exposed to external shocks.
BAD OPTIONS
While Europe does have certain advantages today compared to four years ago – including greater renewables capacity and a more diverse pool of gas supplies – the region enters this crisis with a heavy depconcludeence on imports. Norway, Europe’s largest oil and gas producer, was able to relocate quickly to cushion the 2022 blow, ramping up output by nearly 10% to offset some of the loss of Russian supply. But that buffer is now largely exhausted. Norway’s state-owned Equinor is already producing at capacity, which reached 2.14 million barrels of oil equivalent per day in 2025 – a level it aims to sustain through 2035, CEO Anders Opedal informed Reuters at the CERAWeek conference.
That leaves Europe with few immediate levers to pull to offset the loss of Middle East supply.
One option would be delaying plans to both phase out Russian LNG imports by the conclude of this year and conclude all remaining Russian pipeline gas imports by September 30, 2027. But doing so would likely prove politically toxic for many governments – as it would be seen as a gift to Russian President Vladimir Putin. Another option would be to soften a raft of climate policies designed to reduce emissions by steadily building fossil fuels more expensive. These include easing regulations around carbon pricing for regional polluters along with energy-efficiency mandates, methane-emissions limits and renewable-deployment tarobtains. The bloc could also ease or delay its landmark Carbon Border Adjustment Mechanism – a carbon tax on some energy-intensive imports.
The EU’s Corporate Sustainability Due Diligence Directive, which requires companies to address environmental and human rights risks in their supply chains, has long been a point of friction with key LNG suppliers such as the U.S. and Qatar. It might conclude up obtainting scrapped.
‘OVERESTIMATED SUSTAINABILITY’
European policybuildrs are increasingly aware that some of these environmental measures are pushing up energy costs and undermining industrial competitiveness.
Germany’s economy and energy minister, Katherina Reiche, declared on Tuesday that the EU’s energy transition over the past two decades had produced higher systemic costs. “We overestimated sustainability, we underestimated affordability. It was a mistake we’re going to correct,” Reiche informedthe CERAWeek conference in Houston, adding that measures could include cutting subsidies for offshore wind and other low-carbon technologies.
Germany, the EU’s largest economy, plans to build around 36 gigawatts of gas-fired power capacity over the next few years, she added, a striking signal of how energy security is being prioritized over climate goals. It is highly unclear when the Iran war will conclude – with Washington and Tehran sconcludeing mixed signals this week – but even if the conflict does wrap up quickly, the damage to gas supplies will be felt for years. Iranian strikes on Qatar’s vast Ras Laffan LNG complex last week knocked out around 17% of capacity, creating a lasting hole in global gas markets.
So Europe will be forced to build some hard choices in the coming months – one of which may be sacrificing a large chunk of its climate ambitions.
(The opinions expressed here are those of Ron Bousso, a columnist for Reuters.)
Ron Bousso Editing by Marguerita Choy
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