Hormuz shock drives 12.5% energy inflation

A narrow stretch of sea between Iran and Oman is now testing Europe’s inflation outlook, including Malta’s. Iran says the Strait of Hormuz is closed. Washington disputes whether traffic has actually stopped. Markets, however, do not wait for a perfectly documented blockade. They move on danger, delay and the scramble for replacement cargoes.

The scale explains the reaction. About 20 million barrels a day of oil and petroleum liquids crossed Hormuz in 2024, roughly 20% of global consumption. Around one-fifth of global LNG trade used the same route, according to the EIA. Most of that energy goes to Asia, not Europe. But Malta and the rest of the EU buy energy in global markets, so a chokepoint serving China, India, Japan and South Korea can still raise diesel, gas, fertiliser and industrial-input costs from Rotterdam to Silesia.

The Shock Moves Through Prices First

Europe’s exposure is less about direct Gulf barrels than about price formation. 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 uncomfortable part for small states too: a country can have limited direct supply exposure and still be fully exposed to the price shock.

The first route is expectations. Futures prices rise when traders expect tighter supply, dearer freight or higher war-risk insurance. BNP Paribas has warned that only part of normal Hormuz flows can be diverted by pipeline, leaving oil markets quick to price scarce near-term 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 not in the same way everywhere, because contracts, hedging, tariffs and taxes differ from country to country ECB projections. The same outside shock can therefore become a fuel-price squeeze in one member state, an electricity problem in another, and a hit to industrial margins somewhere else.

Who Pays, And Where

The first to pay are those who cannot easily wait or switch. Commuters, hauliers, airlines, chemical plants, fertiliser producers and food processors feel the pressure fastest. 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 simply a petrol-pump 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 lose sooner than urban households with district heating and strong public transport.

Germany looks exposed because it combines heavy 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 just exposed to the shock; it helps transmit it, because Dutch TTF futures anchor European gas pricing through ICE Endex ICE.

Spain has buffers, not protection. 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 are closer to the slower channels: refined products, fertiliser, transport costs and food prices.

The winners are fewer and easier to identify. LNG exporters outside the Gulf, refiners with inventories, storage operators and traders able to redirect cargoes benefit from scarcity. Governments get no clean choice. Fuel subsidies move the bill from the pump to the budget. Allowing prices to pass through protects public finances but hurts 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%, alongside 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 bind: protect incomes, protect budgets and protect price stability. It cannot fully do 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 to a severe quasi-blockade than to a verified zero-transit closure Les Clés du Moyen-Orient.

The watchpoints now 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 has been folded into the price.