Key facts
- Europe's oil and gas supply is disrupted by conflicts in the Gulf and Eurasia.
- Saudi Arabia has informed European refineries they will not receive crude oil deliveries next month.
- Houthi forces have seized islands controlling key shipping lanes in the Bab el-Mandeb Strait.
- War-risk insurance premiums for Red Sea transits have surged, and some companies are diverting vessels.
- The closure of the Strait of Hormuz earlier this year removed an estimated 17-19 million barrels per day from global markets.
- A drone attack on September 11 closed Saudi Arabia's East-West pipeline, impacting crude oil flows.
Europe is facing a severe energy crisis, exacerbated by concurrent conflicts in the Gulf and Eurasia that are disrupting critical oil and gas supply chains. Saudi Arabia has informed European refineries that they should not expect crude oil deliveries for the upcoming month. This situation highlights Europe's vulnerability due to shallow infrastructure for strategic reserves, reliance on spot markets, and volatile weather patterns.
Houthi forces have made significant territorial gains along Yemen's southwestern Red Sea coast, capturing the Port of Mokha and seizing islands like Mayun/Perim and the Hanish Islands. These locations are critical to tanker and LNG shipping lanes entering the Red Sea via the Bab el-Mandeb Strait. While the strait is not physically closed, Houthi control allows for traffic disruption. Experts note that even a perceived threat can render voyages commercially unviable, leading to increased war-risk insurance premiums and diversions around the Cape of Good Hope, which add 10-14 days to voyages and raise global supply chain costs.
These Red Sea disruptions compound the impact of the earlier closure of the Strait of Hormuz, which removed an estimated 17-19 million barrels per day from global markets. Europe has been relying more heavily on Atlantic Basin and Caspian supply. Saudi Arabia had partially offset the Hormuz shock by diverting crude through its East-West Pipeline to the Red Sea, but a drone attack on September 11 forced its closure. The reopening timeline remains unclear.
Costantinos Stambolis, Chairman of the Institute of Energy for South-East Europe, stated that the current energy crisis is evolving into a global financial crisis, with eurozone inflation accelerating to 3.3 percent and energy inflation jumping to 14.3 percent.
Europe's energy supply is constrained by conflicts affecting both Russian and Gulf supplies. Ukrainian strikes on Russian refineries and export terminals have impacted Russian supply, particularly as European sanctions limit alternative inflows. While US President Donald Trump claimed an agreement was reached not to strike energy targets, Kyiv's response suggests conditionality, with no public confirmation from Moscow.
Kazakhstan, a potential alternative supplier, faces challenges as its primary export route, the CPC pipeline, delivers crude to Russia's Black Sea port of Novorossiysk. Ukrainian attacks on Novorossiysk could render Kazakhstan unable to rely on this main outlet. Alternative routes via the Caspian Sea through Azerbaijan and Turkey have limited capacity and are also not entirely safe, as evidenced by a Ukrainian drone strike on an Iranian vessel in the Caspian Sea on July 25. If Kazakhstan cannot ship west, China becomes the default buyer, potentially reducing volumes available to Europe.
Experts are looking to "demand destruction"—where poorer countries reduce consumption due to high prices—to divert supply to Europe. Weather patterns, such as the anticipated 2026-2027 El Niño, are also a factor. A milder winter could ease demand, but severe cold snaps could spike usage. Strong El Niño events have also been shown to cut European wind power generation, forcing greater reliance on natural gas.
Regulatory changes, such as EU methane rules taking effect in 2027, will require gas and LNG importers to meet specific monitoring and verification standards. This could create a market split between compliant and non-compliant exporters, potentially making compliant gas more expensive and affecting suppliers from Central Asia.