Key Insights

• Fossil fuel dependency as liability: Disruption to the Strait of Hormuz, carrying roughly 20 per cent of global oil and LNG supply, demonstrates how quickly distant conflicts translate into European economic pain.
• Windfall profits demand redistribution: When geopolitical turmoil inflates energy prices, companies with low production costs reap crisis-driven gains that should be redirected into public clean-energy investment.
• Decoupling electricity from gas: Tying power prices to the most expensive marginal gas generation forces households and industries to overpay, even as renewables become far cheaper.
• Infrastructure investment needed to reach mandates: Energy-intensive manufacturers cannot decarbonise without grid capacity, clean energy at scale, and CO₂ transport networks — policy targets alone are insufficient.
• Strategic autonomy needs industrial depth: Geopolitical fragmentation makes reliance on foreign suppliers for hydrogen, batteries, critical raw materials, and semiconductors an unacceptable risk.

The joint US–Israeli strikes on Iran which began on 28 February 2026 mark a dramatic escalation in global instability. The international trade union movement has called for an immediate end to these operations. Such actions violate international law, undermine diplomacy, and will predictably plunge the region into a wider, devastating war.

The operation — described as "massive and ongoing" — targeted Iran's core security and political structures, triggering immediate and widespread retaliation. Iran launched missiles at Israel and US bases across the region. Simultaneously, maritime flows through the Strait of Hormuz, a corridor carrying roughly 20 per cent of global oil supply and the same proportion of global liquefied natural gas (LNG) supply, were disrupted as tanker traffic dropped sharply and insurers withdrew coverage. These events compound months of tension and reinforce how quickly global shocks can ripple into Europe's economy and industrial base.

At this moment of uncertainty, the case for major investment and a proactive European industrial policy has never been stronger. Europe faces an urgent need to enhance its strategic resilience, secure its energy future, and protect its industrial backbone.

Energy dependency as a strategic vulnerability

The current crisis is a stark reminder of Europe's exposure to external fossil fuel shocks. The EU imports approximately 60 per cent of its energy needs but relies fully on imports for its oil consumption and almost entirely for its gas supply — some 90 per cent. Iran's retaliation included efforts to restrict Hormuz traffic, heightening fears of prolonged disruption. The risk of further volatility across all energy products remains high.
This is the first truth we must face: spiking gas and oil prices reveal the dangers of Europe's dependency on imported fossil energy. In the short run, this underscores the importance of a coordinated strategic approach at European level to cushion the shock. Refilling strategic reserves, coordinating diversification, mounting joint efforts to manage demand, and organising joint purchases will be as vital in 2026 as they were in coping with the 2022 energy crisis.

In the longer run, rising prices underscore the strategic necessity of enhancing energy efficiency, accelerating the transition to decarbonised energy, strengthening domestic supply chains, and building genuine energy sovereignty. Europe cannot continue to be at the mercy of global power politics and choke points.

A forward-looking industrial policy is central to delivering this security — by scaling clean-energy manufacturing, deploying critical infrastructure, and ensuring Europe leads in the technologies of the future.

High energy prices also strengthen the case for fairness and structural reform. When geopolitical turmoil drives energy costs sky-high, companies with low production costs but market-linked prices can accumulate excessive crisis-driven profits. This is neither economically efficient nor socially acceptable. Redirecting such windfalls into public investment — especially in clean infrastructure — reinforces both resilience and fairness.

Likewise, the current system ties electricity prices to the cost of the most expensive marginal gas generation, even when renewables are far cheaper. This leaves households and industries paying far more for electricity than its production cost justifies. Decoupling these markets would protect consumers, support Europe's climate goals, and better reflect technological realities.

Yet, there is an additional complexity: these same high prices raise the hurdle for industries trying to decarbonise. For energy-intensive manufacturers — in steel, chemicals, and cement — the economics of transition hinge not only on the cost of clean electricity or hydrogen but also on whether the enabling infrastructure actually exists beyond their factory gates. Many lack access to sufficient electricity grid capacity, clean energy at scale, and CO₂ transport and storage networks. Without this infrastructure, the business case for electrification or hydrogen shifts becomes harder, not easier, when fossil prices spike. Europe therefore needs not only the mandates and incentives of industrial policy, but also the infrastructure investments that make the transition feasible.

Strategic autonomy requires industrial depth

The military escalation also highlights the broader trend of geopolitical fragmentation. The strikes will send ripple effects across supply chains, diplomatic alignments, and global markets for years. They expose the danger of a decarbonisation strategy for industry that relies excessively on foreign suppliers for key commodities such as hydrogen, ammonia, fertilisers, biomass, or basic metals.

In this environment, Europe cannot remain dependent on external actors for critical technologies and commodities — semiconductors, batteries and hydrogen technologies, critical raw materials, defence and security-relevant manufacturing, clean steel, and green industrial inputs. A proactive industrial policy, paired with large-scale public and private investment, is essential to safeguard competitiveness, protect Europe's strategic interests, and maintain technological leadership.

The US–Israeli attacks on Iran and the ensuing regional instability do not weaken the case for industrial policy — they strengthen it on every front. For sovereignty, by reducing Europe's exposure to external energy shocks. For fairness, by ensuring windfall profits are not extracted from crisis and by protecting consumers from distorted electricity pricing. For competitiveness, by providing the infrastructure and investment necessary for industries to transition and thrive.

In moments of geopolitical turbulence, the imperative becomes unmistakable: Europe must build resilience at home and strengthen cooperation with trusted partners, starting with its neighbourhood, while working to rebuild global governance and stability. That requires decisive investment and a bold, strategic industrial policy — now more than ever.