Oil at $97 drains Europe’s strategic reserves

Oil at $97 a barrel. Eurozone inflation at its highest since September 2023. Strategic petroleum reserves draining toward legal minimums. Three months into the Iran-US war's chokehold on the Strait of Hormuz, through which roughly a fifth of global oil transits, European governments are spending billions to cushion the blow. The EU itself has no seat at the only negotiation that could resolve it.

Who Pays, and How

The damage is spreading unevenly, and each government is improvising its own fix. Poland slashed fuel VAT to 8%, holding price rises to 8.8% year-on-year against an EU average of 20.8%. France took a different path: targeted subsidies for truckers, farmers, and low-income commuters, with €130 million already spent and a projected €4–6 billion total cost. Germany and Italy chose blunter instruments: Berlin cut fuel taxes in a package worth €1.6 billion, while Rome estimates the average family is paying hundreds of euros more per year in fuel, electricity, food, and plastics.

All of this is fragmented national spending against a shared supply shock. In March, the International Energy Agency coordinated its largest-ever release: 400 million barrels across 32 countries, with EU states contributing roughly 92 million. By early May, only 164 million barrels had reached the market. The IEA warns that at current draw rates, inventories could hit critical levels before peak summer demand. EU law requires member states to hold 90 days of net imports in reserve. Several risk breaching that threshold within weeks.

The Ad-Hoc Naval Push

European navies are mobilizing, slowly, conditionally, and outside NATO command. France positioned the carrier Charles de Gaulle in the Arabian Sea with roughly 20 Rafale fighters. Germany is sending the minesweeper Fulda via Suez, arriving in two to three weeks. Italy plans four vessels. According to vz.lt, Lithuania's parliament voted 78 to 7 to authorize up to 40 troops for minesweeping. The framework is a Franco-British ad hoc coalition, not an EU or NATO operation.

The EU does have its own naval mission, Operation ASPIDES, launched in 2024 for Red Sea shipping protection. EU foreign policy chief Kaja Kallas floated extending it to Hormuz, saying the mandate already allows this with a change to the operational plan. Mine clearance, though, would require a formal Council decision (meaning unanimous agreement among all 27 governments). Iran has warned Europe against sending warships to the strait at all.

Pakistan Mediates, Europe Pays

Kallas was blunt at the May Foreign Affairs Council (where EU foreign ministers meet monthly): "This is between the US and Iran, and they do not really take in any kind of mediation. We do not have much leverage over both of them."

Pakistan, not France, Germany, or the UK (the European parties to the 2015 Iran nuclear deal), is the one mediating. The April ceasefire Pakistan brokered has decayed into what Trump called shooting "in a more moderate manner." On June 6, the US struck Iranian radar on Qeshm Island; Iran fired seven ballistic missiles at US bases in Kuwait and Bahrain. Hours later, Trump told reporters things were "improving."

The energy shock is fracturing climate commitments too. Germany, France, Estonia, and Spain pressed the Commission to ease carbon-market pressure on heavy industry, demanding longer transition periods for free emissions allowances under the Emissions Trading System (the EU's cap-and-trade mechanism for carbon). The Commission's ETS revision lands July 15. Energy-intensive industries now have their strongest argument in years for slower decarbonization.

Europe absorbs the full economic weight of the Hormuz blockade while the only variable that determines when it ends — a deal between Washington and Tehran — remains entirely outside European control.