As of June 23, 2025, the escalating Iran-US conflict has taken a dramatic turn with the US launching airstrikes on Iranian nuclear facilities, prompting fears of a retaliatory closure of the Strait of Hormuz. This narrow waterway, a lifeline for global energy, channels nearly a fifth of the world’s oil and a significant chunk of liquefied natural gas (LNG). For Europe, the economic stakes are sky-high.
Europe’s Economic Tightrope:
A closure of the Strait of Hormuz would send shockwaves through Europe’s economy, where energy security is already a fragile thread. With approximately 20 million barrels of oil and 90 billion cubic meters of LNG transiting the strait daily, a shutdown would slash energy supplies overnight. European nations, heavily reliant on Middle Eastern imports, could see gasoline prices spike by 50% or more, as warned by analysts tracking the conflict. Industries in energy-hungry countries like Germany and Italy—home to automotive giants and chemical manufacturers—might face production halts, costing billions and triggering layoffs.
The ripple effects would hit inflation hard, with higher energy costs inflating the price of everything from bread to clothing. Central banks, already navigating a delicate balance with interest rates, would lose flexibility, potentially stalling economic growth. Supply chain disruptions could shutter factories, while soaring shipping costs—exacerbated by rerouting around the Cape of Good Hope—would strain trade. For Europe, neutrality in this conflict offers no shield; the economic fire is already licking at its borders.
Riding the Price Surge
The closure of the Strait would be a windfall for Arab oil producers like Saudi Arabia, the UAE, and Kuwait, who dominate Persian Gulf exports. With the strait blocked, their oil—normally funneled through this chokepoint—would face logistical hurdles, but alternative pipelines, such as Saudi Arabia’s East-West pipeline to the Red Sea, offer a lifeline. This shift could temporarily limit capacity, driving prices to $120-$150 per barrel, as predicted by experts. Higher prices would boost revenues for these nations, allowing them to ramp up production and capture market share from disrupted Iranian flows.
Yet, the benefit comes with risks. A prolonged conflict could invite attacks on their infrastructure, as seen with past Houthi strikes in Yemen, forcing reliance on costly military defenses. Still, the short-term gain is clear: Arab producers could leverage their spare capacity—estimated at 5-6 million barrels per day—to stabilize markets while pocketing profits, positioning themselves as indispensable players in a crisis-hit world.
Oil and Geopolitical Gains
Russia stands to gain even more from a Strait closure, insulated by its vast pipeline network that bypasses Middle Eastern chokepoints. As a top oil exporter, Russia could see its crude prices soar, potentially exceeding $100 per barrel, especially if European demand shifts northward. With a huge tanker fleet and no reliance on Hormuz, Moscow could ramp up shipments to Asia and Europe, capitalizing on the chaos. This economic boost would fund its ongoing war efforts in Ukraine and bolster its geopolitical clout.
Beyond economics, Russia could exploit Europe’s vulnerability to deepen divisions within NATO, pushing some nations to seek energy deals with Moscow over Western allies. The irony? A conflict sparked by US intervention might inadvertently strengthen Russia’s hand, turning a crisis into a strategic opportunity. Analysts suggest this could shift global energy alliances, with Russia emerging as a reluctant but powerful beneficiary.
Winners, Losers, and Wild Cards
The war’s economic implications extend beyond obvious players. China, Iran’s top oil buyer, might pressure Tehran to keep the strait open, given its reliance on Gulf imports, potentially mitigating the crisis. Meanwhile, the US, with its shale production, could offset some losses but would still face global price hikes affecting consumers. Europe’s vulnerability highlights a broader lesson: over-dependence on a single chokepoint is a ticking time bomb.
Wild cards abound. If Iran mines the strait or deploys fast-attack boats, clearing it could take months, prolonging the economic pain. Conversely, a swift diplomatic resolution—unlikely but possible—could cap the damage. Europe’s response, balancing emergency reserves with diversified sourcing from the US and Africa, will be critical. The continent’s economic resilience now hinges on agility in a war-fueled storm.
Europe’s High-Stakes Balancing Act
The Iran-US war, with the Strait of Hormuz as its economic fulcrum, threatens to upend Europe’s stability. A closure would ignite inflation, disrupt industries, and strain trade, while Arab producers and Russia reap the rewards of high oil prices. Yet, the crisis also exposes Europe’s need for energy diversification and stronger alliances beyond the Middle East. As missiles fly and markets tremble, Europe must navigate this treacherous terrain, turning adversity into a catalyst for a more secure economic future—or risk being consumed by the fallout.
