The ongoing conflict between Israel and Hamas, along with Washington’s steadfast support for Prime Minister Netanyahu, has brought European hesitation into sharp relief. In capitals from Berlin to Paris, policymakers are voicing growing discomfort over Israel’s prolonged military operations in Gaza. This caution has deepened further as tensions rise between the United States and Iran. Europe wants to avoid entanglement or perhaps more tellingly, Washington isn’t listening. 

But even if European leaders prefer to remain on the diplomatic sidelines, they won’t be immune to the fallout. The Middle East is still a vital hub for the global energy system, and Europe’s own vulnerabilities are painfully clear. Nowhere is this more apparent than in the Strait of Hormuz, the narrow waterway separating Iran from Oman that accounts for 35 percent of global seaborne oil and 20 percent of Liquefied Natural Gas (“LNG”) exports in 2024. According to Simon Chkuaseli , CEO of Eustochos, “Any escalation in the Strait of Hormuz directly threatens supply stability and price volatility.” 

Europe’s corporate landscape is bracing for impact. A former Latin American Ambassador to the United States observed, “Europe’s corporate landscape is no stranger to geopolitical shocks, but few sectors are as exposed as energy and defence.” The most immediate risks are in energy, with companies reliant on Gulf crude and LNG flows scrambling to prepare.  

“Europe’s corporate landscape is no stranger to geopolitical shocks, but few sectors are as exposed as energy and defence.”

Former Latin American Ambassador to the United States

Aviation is also vulnerable, as Mr. Chkuaseli noted that the sector faces “elevated risks in regional airspace, higher insurance premiums and potential disruptions to cargo and passenger routes.” Meanwhile, defence industries are seeing a surge in demand, particularly for missile defence, cyber capabilities and anti-drone systems. The former Ambassador emphasised that “Military spending is rising in step with NATO’s new budgetary commitments, rearmament efforts and the EU’s strategic awakening.” 

For energy firms, contingency plans are already in motion. Mr. Chkuaseli explained that in the short-term, “EU-based energy firms are likely to rely on existing reserves, alternative suppliers and hedging mechanisms to absorb immediate shocks.” Diversified sourcing – from Norway, West Africa and the US – offers some buffer. However, even this doesn’t erase Europe’s fundamental exposure, as about 13 percent of Europe’s LNG imports still come from Qatar and the UAE, all of which pass through the Strait of Hormuz. 

Among the most exposed economies are Italy, which receives 50 percent of Europe’s Gulf LNG, Belgium with 24 percent and Poland with 13 percent. These nations are especially anxious that further escalation could trigger a fresh supply crisis. A former President of the Inter American Juridical Committee observed that “countries such as Italy and Poland are racing to diversify away from Gulf hydrocarbons not just for resilience, but to regain political leverage.” 

Longer term, Europe is working to pivot away from this structural vulnerability. The CEO highlighted, “Europe is expected to deepen energy partnerships with Azerbaijan via the Southern Gas Corridor, invest in Eastern Mediterranean gas from Egypt, Cyprus and Israel and accelerate the transition to renewables and nuclear power.” This is about more than substituting one supplier for another; it’s about aligning energy security with the EU’s climate transition and geopolitical realities. 

“Europe is expected to deepen energy partnerships with Azerbaijan via the Southern Gas Corridor, invest in Eastern Mediterranean gas from Egypt, Cyprus and Israel and accelerate the transition to renewables and nuclear power.”

Simon Chkuaseli , CEO of Eustochos, Europe

Needless to say, these strategies are not without challenges. The former committee president underscored that “LNG is no panacea, especially as demand from Asia rises.” Even as new LNG terminals in Germany, the Netherlands and Poland diversify supply, they come at a cost, both in carbon emissions and in currency. As Europe learned after Russia’s invasion of Ukraine, replacing lost volumes can mean enormous expenses. In 2022 alone, EU states spent EUR 116 billion on LNG imports due to the scramble to replace Russian pipeline gas. 

While energy is “Europe’s Achilles’ heel”, other sectors are quietly bracing for turbulence. The financial sector faces “increased volatility and uncertainty, particularly in commodity and shipping markets,” stated the CEO. European banks exposed to energy-heavy portfolios or entanglements with Gulf sovereign wealth funds may find themselves “caught in the crosswinds of asset repricing and capital outflows,” the former ambassador added. 

For now, European policymakers are trying to buy time by building reserves, coordinating maritime security and preparing energy-rationing plans that could, in a crisis, hit heavy industry before households. “Crises have a way of concentrating the European mind,” commented the previous ambassador. “A prolonged disruption would likely accelerate existing trends rather than trigger dramatic pivots.” 

In such an interconnected world, conflict in the Gulf doesn’t stay in the Gulf. Europe may wish to watch from the sidelines, but “the old order – cheap Gulf oil and cosy strategic dependencies – is eroding,” concluded our source.