Europe burns reserves as oil hits $97

The pressure on Europe begins in a narrow stretch of water far from Brussels. Three months into the Iran-US war’s grip on the Strait of Hormuz, through which roughly a fifth of global oil passes, crude is at $97 a barrel, eurozone inflation is at its highest since September 2023, and strategic petroleum reserves are being pulled down towards legal minimums. European governments are spending billions to soften the hit. The EU has no seat at the negotiation that could end it.

Who Pays, and How

The bill is landing unevenly, so governments are making it up country by country. Poland cut fuel VAT to 8%, keeping price rises to 8.8% year-on-year against an EU average of 20.8%. France went narrower, with subsidies for truckers, farmers and low-income commuters: €130 million already spent and a projected €4–6 billion total cost. Germany and Italy reached for blunter tools. Berlin cut fuel taxes in a package worth €1.6 billion, while Rome estimates that the average family is paying hundreds of euros more each year across fuel, electricity, food and plastics.

This is national firefighting against a shared supply shock. In March, the International Energy Agency coordinated its biggest release yet: 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 could breach that threshold within weeks.

The Ad-Hoc Naval Push

The military response is moving more slowly than the price shock. European navies are mobilising, but conditionally and outside NATO command. France has placed the carrier Charles de Gaulle in the Arabian Sea with roughly 20 Rafale fighters. Germany is sending the minesweeper Fulda through Suez, arriving in two to three weeks. Italy plans four vessels. According to vz.lt, Lithuania’s parliament voted 78 to 7 to authorise up to 40 troops for minesweeping. The structure is a Franco-British ad hoc coalition, not an EU or NATO operation.

The EU does have a naval mission of its own, Operation ASPIDES, launched in 2024 to protect Red Sea shipping. EU foreign policy chief Kaja Kallas has suggested extending it to Hormuz, saying the mandate already allows this with a change to the operational plan. Mine clearance is another matter. It would require a formal Council decision, which means unanimity among all 27 governments. Iran has warned Europe against sending warships to the strait at all.

Pakistan Mediates, Europe Pays

Kallas put the limits of European power plainly at the May Foreign Affairs Council, the monthly meeting of EU foreign ministers: "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 doing the mediating. The April ceasefire brokered by Pakistan has faded into what Trump described as shooting "in a more moderate manner." On June 6th, 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 also weakening climate commitments. Germany, France, Estonia and Spain pressed the Commission to ease carbon-market pressure on heavy industry, asking for 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 is due on July 15th. Energy-intensive industries now have their strongest argument in years for slower decarbonisation.

Europe is carrying the economic weight of the Hormuz blockade, but the variable that matters most remains outside its reach: whether Washington and Tehran can reach a deal.