09 March 2026

The Middle East war and Europe’s new energy price shock

policy responses to exit gas-driven instability, protect households and accelerate energy security through clean power

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Overview

As conflict in the Middle East escalates, the humanitarian toll continues to grow. The civil society community condemns the lawless destruction of civilian lives; and calls for the upholding of international law and full respect for human rights. 

The geopolitical shock is also reverberating through global energy markets. Disruptions affecting major fossil fuel producing regions and key shipping routes are already driving high volatility in oil and gas markets globally. This once again highlights a structural vulnerability in Europe’s energy system: fossil gas still accounts for around 25% of EU energy demand and is structurally unreliable, regardless of where it comes from, exposing households, businesses and governments to price shocks beyond their political control.

Just five years after the energy crisis triggered by Russia’s full-scale invasion of Ukraine, Europe is again facing rising energy prices linked to fossil fuel geopolitics. As energy costs increase, the impact will be felt most strongly by vulnerable households. Energy intensive industries will also be hit by high energy prices.

While the energy price shock will leave many suffering, a small handful of fossil fuel billionaires will profit from this misery. Since Russia’s invasion of Ukraine in 2022, five major oil companies have recorded combined profits of nearly $467 billion, and the EU has paid over €200 billion for Russian energy imports, including €38 billion for LNG. Among the leading importers are the Netherlands, Belgium, France, and Germany.

 

Why energy prices are vulnerable to geopolitical shocks

Europe remains highly exposed to international fossil fuel markets. When global gas prices rise, electricity prices follow. Recent disruptions illustrate how geopolitical instability quickly translates into energy market volatility. Fossil fuel supply chains rely on global production hubs, shipping routes and narrow chokepoints, making them particularly sensitive to conflict.

 

Any approach which leaves us reliant on fossil fuels would only prolong the problem

Attempts to insulate domestic markets through expanded fossil fuel production, including fracking, reopening idle coal plants, or exploiting remaining European fossil basins, do not fundamentally change this destructive pattern. There are currently 252 GW of installed gas capacity in Europe and 97 GW more are under development, with 102 projects for new gas power plants that have been announced or are in the pre-construction phase in Europe. Energy prices are set on international markets and cannot be effectively ring-fenced for domestic consumers. As a result, fossil fuel dependency repeatedly turns geopolitical crises into economic crises.

 

The cost-of-living impact

Higher fossil fuel prices quickly feed through to electricity costs, inflation and household energy bills. According to the UK’s Resolution Foundation, spikes in oil and gas prices could increase inflation by around one percentage point and add roughly £500 to typical annual household energy bills in the UK. Without intervention, rising energy costs risk intensifying existing cost-of-living pressures across Europe.

 

Subsidising gas, a bottomless pit benefiting fossil fuel giants

In Europe, there is a growing pattern of billions of euros in energy subsidies being handed to fossil fuel companies, including EP Group, ENEL and RWE, paid for through levies on household and industrial energy bills. Meanwhile, proven clean and flexible technologies are being pushed out of the market or face disincentives to investment. This expensive gas plant boom is sweeping across Europe thanks to energy support mechanisms, such as capacity markets, which EU institutions are failing to properly scrutinise. 

For instance, Germany plans to spend up to multi-billion on 10 GW of new gas plants, Greece is pushing ahead with a new subsidy scheme to support gas-fired power and Poland has rewritten auction rules to effectively exclude clean battery projects and support a new fleet of costly gas plants.

Energy companies across Europe have long been lobbying for policy support and public subsidies which would leave us strapped into volatile fossil fuel markets for longer. This includes German utilities like RWE and Uniper lobbying the German government for a new fleet of gas plants (source), and advocacy in Italy, Czechia, Austria and Poland to remove price signals that would encourage a transition to clean energy (source). 

Working people consistently bear the cost of fossil fuel volatility, while oil and gas companies keep benefitting from rising prices. In a time of energy price shock with fossil fuels being used as war weapons, using taxpayer’s money to continue to subsidise fossil gas becomes even more problematic and contradictory.

 

Renewables: an already available shield

For the first time last year, wind and solar overtook fossil fuels in the EU electricity mix. Solar powered this shift, growing by a remarkable 20% for the fourth year in a row. As a result, wind and solar outperformed all fossil fuels in 14 of the EU’s 27 countries, and every EU country saw growth in solar generation.

At the same time, clean technology needed to stabilise and bring flexibility to the grid is expected to grow from roughly 150 GW in 2030 to more than 700 GW by 2050. To put that into perspective, 700 GW is nearly four times the entire installed capacity of gas power plants in Europe today (186 GW). 

 

The economic case for action

Just three days of fossil gas price volatility are estimated to have cost Europe €620 million. Over a 72-hour period, the additional costs borne by European consumers were roughly equivalent to the investment needed to install enough solar capacity to power around 220,000 homes for a year.

Reducing Europe’s exposure to volatile fossil fuel markets is therefore increasingly seen as an economic priority. Accelerating electrification, renewable energy deployment and energy efficiency could cut EU gas demand by up to 70% before 2040, while supporting the resilience and competitiveness of the European economy. Recent research also estimates potential savings in Europe of €300 billion per year by 2030. 

 

Policy responses: protecting households and strengthening energy security

Beyond Fossil Fuels argues that governments should combine short-term consumer protection with long-term structural solutions.

 

  1. Provide short-term relief for households

Governments should provide targeted emergency support for vulnerable households facing rising energy bills. Part of this support could be financed through windfall taxes on fossil fuel companies, which are going to benefit from rising wholesale prices during periods of conflict and market disruption. 

While some short-term fixes can be taken to lower bills in the near-term, these expensive sticking plaster solutions do not address the structural drivers of high energy bills. 

 

  1. Accelerate the scale-up of clean energy

The most effective long-term way to stabilise energy prices is to reduce exposure to volatile fossil fuel markets. This requires accelerating investment in:

  • Renewable energy sources such as wind and solar
  • Modernisation and expansion of electricity grids
  • Investment in energy storage and other clean flexibility technologies, such as storage, interconnectors between national power systems, and demand-side flexibility
  • Electrification of industries, including transport and steel

Together, these measures would deliver a more resilient power system, less exposed to international fuel price shocks, and backed by strong support from the business community. A global poll conducted last April last year found that 97% of executives favor a transition from fossil fuels to a renewable-based electricity system.

 

  1. Develop a long-term strategy to phase out fossil gas dependence

Europe also needs a coordinated plan to phase out fossil gas use and shift to cleaner, electrified alternatives, across key sectors, including:

  • electricity generation
  • industrial manufacturing
  • district heating systems
  • transport 
  • residential heating and buildings

This should include fixing policy mechanisms and subsidies that lock in long-term gas dependence and advancing policies that help break the link between the current high and volatile gas prices and power prices using renewables.

Spain provides a leading example in Europe. The country now enjoys some of the lowest wholesale electricity prices on the continent, largely thanks to the rapid growth of solar and wind power, which has reduced the influence of expensive coal and gas generation on the electricity market.

 

  1. Pressure mounts on the EU carbon market, but the EU ETS must stay the course

As energy prices rise, several industrial actors and national governments have called for changes to the EU’s Emissions Trading System (ETS), the bloc’s main carbon pricing instrument. However, these proposals remain contested among governments, industry and civil society.

  • Antwerp Declaration (Feb 2026): A group of heavy industry representatives, mainly from the chemicals sector, urged EU leaders to lower the carbon price set by the ETS. However, an investigation by the Finnish NGO Finnwatch later found that only 16 lobby organisations formally supported the letter, while several companies and associations publicly distanced themselves from its content.
  • October 2025 proposal: A number of industrial companies called for an extension of free carbon allowances, arguing that the system risks undermining competitiveness while downplaying its essential role in internalising environmental costs otherwise be borne by tax payers.
  • Italy’s Energy Bills decree (Feb 2026): The Italian government approved a decree that reimburses gas-fired electricity producers for the cost of the ETS, effectively subsidising fossil generation rather than driving its reduction, through the introduction of a tariff component on consumers’ electricity bills. Such a move risks entrenching the very vulnerability – high prices – it seeks to mitigate.

However, these proposals remain contested. Governments including Spain and several Nordic countries, alongside progressive industry actors and other voices, have pushed back against attempts to weaken the ETS. They warn that the EU’s carbon pricing system is already shaping long-term investment decisions across heavy industry. Weakening it would only entrench dependence on expensive and volatile oil and gas and penalise progressive companies that have already invested in clean solutions. 

 

  1. Upcoming policy moments we call on governments to act

Governments face a series of important climate and energy policy milestones in the coming months, where they will be expected to translate commitments into concrete steps and timelines to phase fossil fuels out of their energy systems. 

Next week, the European Council will meet on 19-20 March to discuss the crisis in the Middle East. Energy security is expected to feature prominently on the agenda, with the European Commission President set to present to member states on energy prices and concrete actions to reduce the continent’s dependence on fossil fuels

Later this summer, EU member states will submit their Flexibility Need Assessments in July, marking an important step in identifying national gaps and investment opportunities for storage, grids, interconnectors and other clean technologies that can better integrate renewable energy into the power system.

Beyond Europe, international momentum is also building. In April, countries supporting a roadmap away from fossil fuels in Belém will meet again in Santa Marta at a forum co-hosted by the Dutch and Colombian governments. The meeting aims to establish a process through which a coalition of countries, subnational governments and stakeholders can identify practical pathways for a progressive, just, orderly and equitable transition away from fossil fuels, drawing on input from governments, academia, Indigenous Peoples, Peoples of African Descent, peasants, civil society, the private sector, workers and other key actors.

 

Quotes

 

Tara Connolly, Energy Campaigner, Beyond Fossil Fuels – tara.connolly@bff.earth 

“This latest energy shock shows once again how dangerous Europe’s dependence on fossil fuels remains. Governments must act quickly to shield vulnerable households and businesses from rising energy bills with targeted emergency support. But crisis response cannot stop there. The only way to protect people from the fossil fuel price rollercoaster is to accelerate the transition to renewables, electrification and clean flexibility solutions such as battery storage. Delaying this transition would leave Europe exposed to the next fossil-driven price shock”.

Audio quote here

 

Juliet Phillips, Campaigner, Beyond Fossil Fuels – juliet.phillips@bff.earth

“The main challenges of today’s power system find their answer in clean flexibility, not gas. Storage, interconnectors, smart meters and other flexibility technologies are already delivering more stable electricity bills, cleaner and more efficient energy – as well as greater consumer choice. They are also the answer to energy security through supporting more independence from fossil fuel volatility and imports. Knowing this, decision-makers cannot justify investing huge sums of money in unnecessary gas plants, imports or subsidies, when superior alternatives are already available”.

 

Giulia Giordano, Global and Mediterranean Strategy Director, ECCO – 

“For Europe, rethinking energy security by anchoring it to the development of renewable energy, grids, storage and interconnections, as well as energy efficiency and savings, is now not only a choice aligned with international climate commitments but an imperative for security and strategic autonomy”. (read full article)

 

Ana Maria Jaller-Makarewicz, Lead Energy Analyst,  Institute for Energy Economics and Financial Analysis (IEEFA) – ajallermakarewicz@ieefa.org

“Europe is facing the biggest wake-up call to electrify since the full invasion of Ukraine.

Once again, we see that Europe’s energy security is jeopardised by supply disruptions, by import dependencies, price volatility and market uncertainty. And we already found a solution: replacing gas consumption with renewables and energy efficiency is key to decreasing this dependency on gas and energy imports”.

 

Jan Rosenow, Professor of Energy and Climate Policy, University of Oxford:

“It’s interesting the timing of this, right? Because of some of the pushback we’ve seen against the ETS, for example. We’ve just seen last week the German government roll back the heating law, which drove heat pump deployment. I could count more examples of recent rollbacks of policies that came out of RepowerEU and the 2022 energy crisis, and now we suddenly find ourselves in a similar situation again. So it’d be very interesting to see whether that will have the reverse effect”.

 

Constantin Zerger, Head of Energy and Climate Protection, Deutsche Umwelthilfe (Environmental Action Germany):

“Fossil energy is a volatile commodity. Oil and gas supplies are vulnerable to disruption through wars and geopolitical conflicts. The current crises show that a reliable, affordable and competitive energy system can only be built on renewables and electrification. European leaders must double down on implementing RePowerEU, accelerate the shift away from oil and gas and build a clean and secure energy future for Europe’s citizens and industries.”

 

Resources

Clean flexibility – February 2026 (read report by The Brattle Group)

  • Not only clean flexibility reduces reliance on fossil gas, but it also lowers energy bills for customers, with estimated potential savings in Europe of €300 billion per year by 2030. 
  • Clean flexibility capacity in Europe is expected to grow from roughly 150 GW in 2030 to more than 700 GW by 2050. To put that into perspective, 700 GW is nearly four times the entire installed capacity of gas power plants in Europe today (186 GW).
  • 2026 is a major year for clean flexibility in the EU. By June 2026, Member States will need to submit their Flexibility Needs Assessments, which should set ambitious national targets for non-fossil flexibility that align with climate and energy goals [briefing + 1 pager].

 

Contacts

Margherita Gagliardi, Communications Director, Beyond Fossil Fuels – margherita.gagliardi@bff.earth

Nina Tramullas, Senior Media Manager, Beyond Fossil Fuels – nina.tramullas@bff.earth

Tara Connolly, Campaigner, Beyond Fossil Fuels – tara.connolly@bff.earth

Juliet Phillips, Energy Campaigner, Beyond Fossil Fuels – juliet.phillips@bff.earth

 

About Us

Beyond Fossil Fuels is a civil society network committed to ensuring a just and rapid transition to a fossil-free, renewables-based future. Building upon the Europe Beyond Coal campaign, its goal is for Europe to be coal-free by 2030 and phase out fossil gas from the power sector by 2035. A clean and flexible energy system will deliver lasting benefits for people, the climate and the broader economy. Beyond Fossil Fuels is a non-profit organisation with an office in Berlin, with staff spread across Europe.

www.beyondfossilfuels.org