Europe faces continued elevated oil and gas prices, even with a ceasefire in the Iran conflict. The extended disruption, including the de facto closure of the Strait of Hormuz, has severely impacted global energy supplies, according to the International Energy Agency (IEA).

While Europe's direct reliance on oil and gas through the Strait of Hormuz is limited, the broader market shock has significant repercussions. The IEA notes that the strikes on Gulf facilities are expected to have a multi-year impact on gas supply. The Strait of Hormuz, critical for global oil and LNG shipments, saw nearly 15 million barrels of crude oil per day pass through it in 2025. Of this, about 4% was routed to Europe.

Even with a peace deal, a rapid return to pre-war energy prices is unlikely. "Even if that peace is here tomorrow, still we will not go back to normal in the foreseeable future," stated EU's Energy Commissioner Dan Jørgensen.

Global crude prices, which peaked near $120 per barrel before the ceasefire, remained around $93. European gas prices also climbed significantly, settling around €44/MWh after peaking at €61.93/MWh. This surge impacts European energy bills as electricity prices are often set by the most expensive source, typically gas.

Physical supply disruptions are compounded by uncertainty, driving a significant risk premium in markets. Shipping costs and war-risk insurance premiums have quadrupled, adding to the delivered cost of crude.

Long-term damage to energy infrastructure, including Qatar's Ras Laffan LNG plant, will take years to repair. QatarEnergy declared force majeure on some contracts, with recovery expected to take up to five years. This reduced availability, coupled with Europe's heavy reliance on LNG and competition with Asia, will keep prices elevated.

While benchmarks cooled after the ceasefire, they remain higher than pre-war levels. Analysts predict prices above €40/MWh are a plausible near-term scenario as Europe refills storage. The sustained fall in consumer prices will depend on rebuilding inventories, ongoing supply tightness, and the details of any peace agreement, which must address shipping and insurance costs to mitigate perceived durability of the conflict's risks.