Hormuz shock drives 12.5% energy inflation

A strip of water between Iran and Oman has become Europe’s next inflation test. Tehran says the Strait of Hormuz is closed. Washington disputes whether traffic has actually stopped. For energy markets, the distinction matters less than you might hope. Danger, delay and a scramble for replacement cargoes are enough to move prices.

The scale explains the nervousness. About 20 million barrels a day of oil and petroleum liquids crossed Hormuz in 2024, roughly 20% of global consumption, while around one-fifth of global LNG trade used the same route, according to the EIA. Most of that energy goes to Asia rather than Europe. But Europe still buys into global markets, so a chokepoint serving China, India, Japan and South Korea can raise diesel, gas, fertiliser and industrial costs from Rotterdam to Silesia.

The Shock Moves Through Prices First

Europe’s vulnerability is not mainly about direct Gulf barrels. Germany took only 6.1% of its crude imports directly from the Middle East in 2025, while its overall energy import dependence stood at 67%, Destatis notes. That is the awkward bit: a country can have modest direct exposure and still be badly exposed to the price.

The first route is expectations. Futures prices rise when traders see tighter supply, higher freight costs or a bigger war-risk premium. BNP Paribas has warned that only part of normal Hormuz flows can be bypassed by pipeline, leaving oil markets quick to price scarce immediate supply through the Brent curve BNP Paribas.

The second route is the pass-through from wholesale energy to households and firms. The ECB’s June projections say higher crude and refined-product prices feed fully and quickly into liquid fuels. Gas and electricity move more slowly, and unevenly, because contracts, hedging, tariffs and taxes differ by country ECB projections. The same external shock can therefore become a fuel-price squeeze in one place, a power-price problem in another, and an industrial-margin problem somewhere else.

Who Pays, And Where

The first to feel it are those who cannot easily wait or switch. Commuters, hauliers, airlines, chemical plants, fertiliser producers and food processors face the quickest pressure. Eurostat’s industry data show EU industry consumed 8,835 petajoules of energy in 2024, with electricity at 33.3%, natural gas at 31.9%, and oil products still at 10.4% Eurostat. This is not just a petrol-station story.

Households feel it through heating, electricity and transport. EU households used 9.54 million terajoules of energy in 2024, with gas at 29.4%, electricity at 26.9%, and space heating alone at 61.5% of household energy use Eurostat. Gas-heated homes and drivers are hit earlier than urban households with district heating and decent public transport.

Germany looks exposed because it combines industry, imported energy and thin summer storage. NDR reported gas storage near 35% on 9 June, around 25 percentage points below the 2017-21 average, while BDEW put German storage at 35.3% on 9 June and the THE spot price at €50.3/MWh on 10 June NDR, BDEW. The Netherlands plays a different role. It is not only a victim of the shock but a transmission point, because Dutch TTF futures anchor European gas pricing through ICE Endex ICE.

Spain has buffers, not immunity. Its regasification capacity and renewables help, but La Vanguardia reported national energy dependence at 68.4% of final consumption, with the PNIEC target at 50% by 2030 La Vanguardia. Italy and Poland sit closer to the slower channels: refined products, fertiliser, transport costs and food prices.

For Ireland, the relevant lesson is familiar enough from every energy shock since 2021. The pain does not have to arrive as a missing cargo. It can arrive through pump prices, fertiliser bills, airline costs and the margins of food processors who are already price-takers in international markets.

The gains are narrower. LNG exporters outside the Gulf, refiners with inventories, storage operators and traders able to redirect cargoes benefit from scarcity. Governments get no clean choice. Subsidising fuel moves the bill from pumps to budgets. Letting prices pass through protects public finances but hits voters and firms. Higher interest rates can contain inflation expectations, but they cannot reopen Hormuz.

That is why the ECB’s latest forecast matters. It projects euro-area headline inflation peaking at 3.4% in Q3-Q4 2026 and energy inflation at 12.5%, then pairs the shock with a 25-basis-point rate rise and a warning that fiscal support should be temporary, targeted and tailored ECB projections, ECB statement. Europe is back in the old energy trap: protect incomes, protect budgets, protect price stability. It cannot fully protect all three at once.

The Open File

The hardest fact is still the physical status of the Strait. French reporting has described a fall from about 160 ships a day to 11, but that figure remains weak without independent vessel-tracking confirmation Le Grand Continent. Expert commentary also leaves room for continued passage, which points more towards a severe quasi-blockade than a verified zero-transit closure Les Clés du Moyen-Orient.

The next things to watch are practical: actual tanker movements, war-risk insurance, Qatari LNG cargoes, European storage fills, diesel prices and fertiliser costs. Europe does not need to run out of energy for Hormuz to hurt. It only needs to keep buying fossil fuels in a market where danger is now part of the price.