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Iran fighting drives oil and gas prices higher, raising inflation fears in Europe
Renewed US-Iran hostilities near the Strait of Hormuz have pushed Brent crude past $95 and European gas futures to three-year highs, threatening to reignite the continent's inflation problem just as winter approaches.
Renewed fighting between the US and Iran has sent oil and gas prices surging, with Brent crude climbing past $95 per barrel and European natural gas futures hitting levels not seen in three years. For a continent still nursing wounds from the 2022 energy crisis, the timing could hardly be worse: winter is coming, and so are the heating bills.
Brent crude rose more than $4 per barrel to settle near $94.65 on September 1, 2026, then pushed above $95 the following day. European natural gas futures have exceeded €70-75 per MWh, their highest since 2023.
The Strait of Hormuz problem
The Strait of Hormuz, that narrow waterway between Iran and the Arabian Peninsula, handles roughly one-fifth of global LNG supplies and a massive share of seaborne oil. US airstrikes on Iranian positions near the strait, followed by Iranian retaliation, have sharply curtailed tanker traffic through the chokepoint. Recent reports indicate only a handful of vessels are making daily passages, a fraction of normal flow. President Donald Trump has called for strong responses to Iranian provocations.
US-Iran tensions flared in late February 2026, pushing prices higher before a temporary ceasefire in June offered a brief window of relief. Then late August brought renewed hostilities, and the cycle restarted.
Since March 2026, the conflict has added an estimated $330 billion to global energy import bills. Europe’s share of that tab sits at approximately $78 billion.
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Inflation’s unwelcome comeback
Eurozone inflation has now accelerated to around 2.9-3.3%, with energy components showing double-digit annual increases. Just months ago, the ECB was navigating a path toward easing monetary conditions as inflation appeared to be converging toward its 2% target.
Europe is particularly exposed because it never fully solved its energy dependency problem after cutting ties with Russian gas. The continent has diversified its supply sources, leaning more heavily on LNG imports from the US, Qatar, and other producers. But diversification doesn’t eliminate vulnerability when the conflict sits right on top of a major shipping lane that many of those supplies pass through.
What investors and policymakers are watching
The immediate concern is whether the disruption to Strait of Hormuz traffic worsens or stabilizes. A handful of daily vessel passages is manageable for weeks, not months. If the situation persists into October and November, European gas storage levels heading into winter could become a serious issue.