As the conflict involving Iran, the US and Israel destabilises the Middle East, Europe faces mounting economic pressures, energy insecurity and difficult questions about its relationship with Washington.
While Washington and Tel Aviv have pursued military action against Tehran, European leaders have sought to position the bloc as an advocate for de-escalation, international law and a negotiated settlement.
In its conclusions of 15-16 October 2026, the European Council expressed grave concern over the continuing military escalation, condemned Iranian attacks against countries in the region and called on all parties to respect international law and protect freedom of navigation.
The bloc has also reiterated that Iran must never acquire a nuclear weapon and must comply with its international nuclear obligations. In an EU statement to the UN Security Council on 15 October, the European External Action Service (EEAS) stressed that a sustainable resolution to outstanding issues with Iran could only be achieved through negotiations.
The diplomatic approach reflects a wider concern as the war’s consequences are increasingly being felt across European economies, energy markets and international trade.
Energy security: Europe’s immediate vulnerability
One of the most significant consequences for the EU is the disruption to energy supplies and the resulting increase in prices.
The Strait of Hormuz, situated between Iran and Oman, is one of the world’s most important energy shipping routes. Disruption to commercial shipping through the waterway has affected global oil and gas markets, contributing to higher prices and uncertainty over future supplies.
Europe remains exposed to these developments despite efforts to diversify energy suppliers following Russia’s invasion of Ukraine.
The European Commission’s Joint Research Centre (JRC) examined the potential economic consequences of a prolonged Middle East crisis in its analysis published on 27 May 2026. Its modelling suggested that, under a scenario involving severe and extended disruption to the Strait of Hormuz, oil prices could reach $180 a barrel and European gas prices €80 per megawatt hour in the final quarter of 2026.
Under the same scenario, EU inflation could reach 3.5% in 2027, compared with a baseline projection of 2.4%. Economic growth could also fall to 0.7%, against a baseline of 1.4%.
Higher energy costs affect electricity prices, transport, manufacturing and agriculture. Fertiliser production, which relies heavily on natural gas, is particularly exposed, potentially increasing food production costs and putting further pressure on households.
The Commission has also been monitoring the immediate supply implications, stating that although the EU had experienced price effects, there had been no immediate physical disruption to consumer supplies. It nevertheless warned that prolonged disruption could tighten markets, particularly for jet fuel.
An economic and political challenge for Brussels
The economic consequences create a difficult balancing act for European governments.
Governments face pressure to protect households and businesses from rising fuel and electricity bills. However, subsidies and financial support schemes risk placing additional pressure on already stretched public finances.
A recent European Parliament briefing, examining the economic and fiscal implications of the Middle East crisis, highlighted the impact of energy-price volatility on inflation, growth and European competitiveness.
It warns that prolonged disruption to energy supplies could drive inflation higher, weaken economic growth and undermine European competitiveness. As a major energy importer, the EU is particularly exposed to rising oil and gas prices, which increase costs for households and businesses.
The briefing also highlights the pressure on national budgets as governments consider financial support to offset rising energy costs, reinforcing the need to diversify energy supplies and strengthen Europe’s energy independence, something which demonstrates how the conflict is affecting not only Europe’s immediate energy costs but also its longer-term climate and regulatory policies.
The transatlantic relationship after the US midterms
The US midterm elections of 3 November have introduced another layer of uncertainty into Europe’s response to the crisis.
Democrats captured majorities in both the House of Representatives and the Senate, delivering a significant political setback to President Donald Trump. A Democratic-controlled Congress could increase scrutiny of the administration’s military strategy towards Iran, its support for Israel and the financial costs of continued involvement in the Middle East.
For European governments, greater congressional scrutiny could increase pressure on Washington to pursue negotiations with Tehran, however, the election result does not automatically change US foreign policy or the president’s authority to conduct military operations.
The change in congressional control could also deepen disagreements between Washington and European capitals over defence spending, trade, sanctions and international security.
For the EU, the central question is whether it can maintain a coordinated diplomatic position while preparing for greater uncertainty in its relationship with Washington.
Europe’s strategic dilemma
The conflict has exposed the limits of Europe’s influence in a crisis involving major military powers, while highlighting its vulnerability to developments beyond its borders.
The EU remains committed to diplomacy, international law and the protection of commercial shipping. But its ability to influence events depends on cooperation between member states, engagement with regional partners and its relationship with the United States.
The immediate priorities remain preventing further escalation, restoring freedom of navigation through the Strait of Hormuz and containing the economic consequences.
The longer-term challenge is more fundamental: reducing Europe’s exposure to external energy shocks while developing a foreign and security policy capable of responding to an increasingly unstable international environment.
(Sources: European Council, European External Action Service, European Commission)
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