Brussels urges calm as Iran crisis sends European gas prices soaring

Good morning. The war in the Middle East continued to expand overnight as Israel and Hizbollah exchanged strikes, Iran hit the US embassy in Riyadh and bombarded the United Arab Emirates with missiles, and US President Donald Trump claimed to have “virtually unlimited” supplies of weapons at his disposal. 

Today, our new energy correspondent reports on Brussels’ nothing-to-see-here response to the biggest jump in European gas prices since 2022, and Croatia’s economy minister tells our team that their pipeline could solve a Hungarian-Ukrainian stand-off over oil supplies.

Supply shock

Gas prices have soared and European storage levels are at record lows, but the European Commission is not yet springing into action to reinforce security of supply, writes Ian Johnston.

Context: The spiralling Middle East conflict sparked by US-Israeli strikes on Iran has roiled energy markets. Tehran’s retaliation plan has been to intentionally target energy-production facilities in the Gulf region, in a bid to inflict economic pain on Washington’s allies with a drastic cut in global oil and gas supplies.

Iranian drone strikes on QatarEnergy, the world’s largest liquefied natural gas company, saw it halt production yesterday, triggering a rush to find alternative suppliers in what analysts said was the biggest threat so far to the global economy from the conflict.

Europe’s gas price benchmark TTF rose by over 50 per cent during intraday trading, before closing 39 per cent higher at €44.51 per MWh, in the biggest daily percentage move in more than four years.

European supply concerns, which have revived bitter memories of the 2022 gas crisis following Russia’s invasion of Ukraine, have been exacerbated by the near closure of the Strait of Hormuz by Iran, a pivotal waterway for Gulf oil and gas to reach global buyers.

The Commission yesterday said it would convene a meeting of oil experts, and member states have provided assessments of their supplies.

But it has not organised a similar meeting of gas experts. Commission energy spokesperson Anna-Kaisa Itkonen said that Brussels is not yet “seeing anything of concern” in gas, thanks to diversification of European supplies.

Separately, the Commission said it was “closely tracking both price and supply developments”, and would convene a first meeting this week of “an energy task force with member states, in liaison with the International Energy Agency”.

European gas reserves are currently at just 30 per cent, a level the Commission said is “safe” as the European heating season draws to a close. But some countries are in a worrying position: Dutch supplies are languishing at just over 10 per cent.

In the last energy crisis, natural gas prices stayed “sky-high” for almost half a year, according to ING analysis. Although the Commission’s message has been to avoid panic for now, a lasting crisis could have more painful economic and political impacts across the continent. 

Chart du jour: Slowing arrivals

Asylum applications in European countries fell by around one-fifth last year, amid geopolitical shifts and policy changes, according to the EU asylum agency’s annual report published today.

Piping up

Croatia has pitched a solution to the stand-off between Ukraine, Hungary and Slovakia over oil flows through the damaged Druzhba pipeline, arguing it can provide alternative supplies, write Amy Mackinnon, Myles McCormick and Marton Dunai.

Context: Budapest has blocked a €90bn loan to Ukraine, blaming Kyiv for halting Russian crude flows via the Druzhba pipeline to Hungary and Slovakia. The pipeline was badly damaged in a Russian attack in January.

Hungarian Prime Minister Viktor Orbán has accused Ukraine of slow-walking repairs, and Kyiv is also facing pressure from the EU to restore access to the pipeline after rejecting requests by officials to inspect it.

Croatia’s economy minister Ante Šušnjar, however, said that Hungary and Slovakia could be supplied through the Adria pipeline, reducing their dependency on Druzhba and Russian oil.

“We called our friends and neighbours from Hungary and Slovakia to abandon the Russian fossil fuels because we have sufficient capacities to provide them all needs they have,” Šušnjar told the FT.

Croatia’s Adria pipeline is capable of supplying up to 15mn tonnes of non-Russian crude, said Šušnjar, exceeding the capacity of refineries in both Hungary and Slovakia.

“As soon as we start, we can prove that we are able to provide significant and sufficient volumes,” Šušnjar said.

Hungary’s government and its state-controlled oil company MOL, however, dispute this. “The Russian is the main system, the Croatian is supplementary,” Orbán said last week.

Hungarian and Croatian experts have agreed to perform checks on the Adria pipeline to ascertain its capacity. But even if Adria is used more, MOL has said it wants to retain the ability to use Druzhba to have alternative oil import routes.

What to watch today

German Chancellor Friedrich Merz meets US President Donald Trump in Washington.

Dutch Prime Minister Rob Jetten visits Brussels.

EU Council President António Costa, European Commission president Ursula von der Leyen, European Central Bank president Christine Lagarde and Eurogroup president Kyriakos Pierrakakis meet.

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