-- The European Union issued a stark warning to member states, cautioning that a prolonged Middle East conflict could trigger a prolonged supply shock that would force cuts to fuel consumption, Reuters reported on Wednesday, citing EU diplomats.
The closure of the Strait of Hormuz, which usually handles 20% of the world's oil and liquefied natural gas, has roiled global energy markets since the outbreak of the conflict on Feb. 28.
Though Europe has not yet faced supply shortages, a deepening energy crisis is sending shockwaves through the continent's economy. Record-high oil and gas prices are squeezing consumers, while a fresh threat looms over the aviation sector.
The European Commission is considering two main scenarios in the face of the looming energy crisis, the report said.
The Commission said that if a ceasefire between the US and Iran holds and Washington lifts its blockade of the Hormuz, oil and gas flows could normalize within months, helping to drive prices lower.
The Commission did not immediately respond to' request for comment.
Diesel and jet fuel markets would take longer to rebalance, with prices expected to ease toward the end of the summer. The global LNG market, however, is likely to remain tight through 2030, reflecting damage to key infrastructure in Qatar.
However, if the conflict continues, energy markets risk a prolonged supply shock and sharp price spikes, with knock-on effects across industrial supply chains. Sustained disruptions to oil flows would increasingly trigger "demand destruction," curbing fuel consumption, the report said.
The EU said that in such a scenario, it may struggle to replenish gas storage ahead of winter, while localized shortages of jet fuel could emerge.
The Commission is preparing a package of measures to cushion the energy shock, including proposals to reduce electricity taxes and accelerate the rollout of clean technologies. The aim is to curb the bloc's reliance on fossil fuels and shield it from future oil and gas disruptions.
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