The Old Continent is trapped in a deadly trap
The celebrations in international markets over the temporary framework agreement between the US and Iran and the opening of the Strait of Hormuz are proving to be premature and extremely dangerous. Despite a short-term cooling of nominal prices, Europe is facing a nightmarish "Black Winter," as its energy security, in the aftermath of the war in Ukraine, has suffered a mortal blow. With European natural gas reserves sinking to an alarmingly low 45% (compared to the seasonal average of 55%) and Qatar’s export capacity crippled by Iranian missile attacks, the Old Continent is trapped in a deadly snare. The total ban on Russian gas by 2027 turns the EU into an absolute hostage of American LNG, exposing European economies to geopolitical blackmail from Washington and the threat of a new, violent supply shock—especially if a Trump administration implements an "America First" doctrine.
Temporary relief
Specifically, according to Chatham House, European governments—most of which rely on oil and gas imports to fuel their economies—are watching with concern as prices rise and storage levels fall in the weeks following the US-Israeli attack on Iran, which caused the closure of the Strait of Hormuz. One could justify the relief felt at the news of the framework agreement between the US and Iran, which promises to allow the passage of ships through the Strait, through which about one-fifth of global oil and liquefied natural gas (LNG) flowed before the war. However, this relief is premature. Even in the event of a definitive agreement, it will take months for maritime flows to be fully restored. Operationally, time will be required to effectively redesign routes, as ships still face difficulties traversing the Strait and supply chains remain disrupted. Most importantly, insurance and shipping companies must be convinced that transit will be secured in the long term, which remains uncertain. More importantly, the war has reshaped the global LNG market, on which Europe increasingly depends, in ways that do not favor its energy security. This restructuring will continue to burden Europe regardless of any agreement.
Supply
Following the dramatic reduction in gas flows via pipelines from Russia to Europe in 2022, after its invasion of Ukraine, Europe has been importing increasing amounts of LNG from the United States. In 2021, 28% of the LNG imported by Europe came from the US; by 2025, that figure had risen to 58%. Data from the first quarter of 2026 shows it reached 63%. Europe was expected to turn increasingly to Qatar as a major LNG supplier. Before the war, the Gulf state planned to double its LNG export capacity by 2030 (compared to 2025 levels), which would have cemented Qatar as the world's second-largest LNG exporter, behind only the United States. For Europe, this would have offered much-needed diversification of supply in a highly concentrated gas supply mix.
However, the severe damage caused by Iranian missiles during the war took approximately one-sixth of Qatar's export capacity offline. Although a concrete agreement would allow Qatar to restart exports in the coming months, the destroyed production capacity may take several years to be fully restored, while the planned expansion of export capacity is expected to be delayed. Some planned projects may never materialize. Consequently, LNG from the Gulf will likely now carry a geopolitical risk premium, which will account for potential closures or conflicts in the Strait of Hormuz. Europe’s dependence on American LNG is therefore expected to increase and extend even further into the future, particularly considering the EU-27's decision to ban all Russian natural gas imports before the end of 2027.
Counting both pipeline flows and LNG imports, it is likely that in 2026 the United States will surpass Norway to become Europe's largest total supplier of natural gas, as Russia was before 2022. This dependence exposes Europe to potential coercion from the US, which has made clear its intention to use energy exports as a tool of geopolitical influence. At the same time, it reduces the continent's ability to set market terms. This is visible, for example, in the expected weakening of EU rules, under American pressure, aimed at reducing methane emissions associated with LNG production.
Optimism
Although market optimism surrounding the temporary US–Iran agreement led to a drop in nominal oil and gas prices, the European natural gas price is unlikely to return to pre-war levels, further burdening the persistently high prices that have plagued the continent since the 2022 energy crisis, which was linked to the Russian invasion of Ukraine. Natural gas reserves in Europe remain low, at 45%, compared to the 55% seasonal average. The need to replenish reserves before the cold winter months will increase demand during the summer and autumn. LNG relies on specialized infrastructure, which limits its supply more than is the case with oil. Before the war, most Qatari LNG went to Asia. With the reduction in supply from Qatar, buyers from Asia and Europe are now competing more intensely for the same limited amount, and this competition drives up prices.
Looking ahead, Asian demand is likely to be even higher than usual due to El Niño weather patterns, which increase the demand for air conditioning. So far, US natural gas prices have remained low as limited export infrastructure has restrained exports, while production increased as a byproduct of intensified oil drilling. However, the US plans to increase LNG exports by nearly 30% next year and more than double them by 2029, through a massive expansion of new LNG export infrastructure. This will likely exert upward pressure on US prices and strengthen the link between American prices and higher European and Asian prices. And if US prices rise, there is at least the possibility of a new supply shock—if, for example, the US reinstated oil and gas export restrictions. It is unlikely that an American president would impose an export ban, as such a move would be highly unpopular with the US fossil fuel industry. However, high energy prices for consumers are already a political friction point, and it is easy to imagine a scenario in which a Trump administration would restrict exports in order to reduce domestic prices, as part of an "America First" approach. There are no quick fixes on the supply side. Europe consumes more natural gas than it can find within its borders. According to the most recent data, it consumes 11.7% of the global supply of natural gas, while producing only 4.8% and possessing only 1.7% of global proven reserves.
Even increased domestic production would offer only limited protection, as European consumers would still be exposed to high and volatile prices. The answer lies on the demand side: reducing exposure by replacing natural gas with alternatives, such as substitution by renewable energy sources and battery storage systems in power generation. Even under pre-war price conditions, LNG is an expensive option. Rough estimates suggest that the cost of generating electricity from LNG after the price drop that followed the 2022 surge ranged between 90 and 125 euros per megawatt-hour (MWh), compared to about 50 to 70 euros per MWh from a combination of solar energy and four-hour battery storage. This also means improving the energy efficiency of buildings and installing heat pumps in homes, which are three to five times more efficient than traditional gas boilers. The upcoming EU Electrification Action Plan, which is expected to be presented on July 22, must include measures to accelerate the deployment of this critical technology.
Market signals
Equally important is maintaining the market signals that are already promoting the transition away from fossil fuels. Un-targeted fossil fuel subsidies, while perhaps temporarily necessary for vulnerable social groups, are an interventionist measure that artificially lowers prices and encourages greater consumption. This, in turn, reduces the incentive to transition to safer, low-carbon alternatives, limiting Europe's resilience to the next shock in oil and gas markets. The EU Emissions Trading System (ETS), along with corresponding systems in the UK and Switzerland, has played a decisive role in reducing the use of fossil fuels in power generation by imposing a cost on carbon emissions. The planned expansion of the ETS to the building and road transport sectors—ETS2—is critical for the widespread adoption of heat pumps and electric vehicles. However, its implementation has already been delayed and weakened. The outcome of the European Commission's ETS review on July 15, as well as the progress of ETS2 in the European Council and the European Parliament, will indicate whether Europe is heading toward a future of greater energy security.
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