Europe races to shield households as energy prices surge amid twin wars and supply chaos

Governments across the European Union are preparing tax cuts, subsidies and other temporary measures to shield households and industries from soaring energy costs triggered by the U.S.-Israeli war on Iran.

Europe’s heavy reliance on imported oil and gas has left the bloc exposed to global price spikes following disruptions in the Strait of Hormuz and attacks on energy infrastructure in the Middle East. Gas prices have risen around 50% and oil prices by 27% since the conflict escalated.EU leaders discussed the crisis at a two-day summit in Brussels that ended in the early hours of Friday.

They stopped short of concrete bloc-wide decisions, instead tasking the European Commission with urgently preparing a “toolbox” of targeted temporary measures to mitigate the impact on imported fuel and electricity prices.

European Commission President Ursula von der Leyen outlined options at the summit’s close, including lowering taxes on electricity – which in some countries is taxed up to 15 times more heavily than gas – and expanding state aid flexibility. “In some cases electricity is taxed much more than gas, up to 15 times more. And this cannot be so,” she said. “We will propose to lower tax rates on electricity and to make sure that electricity is taxed less than fossil fuels.”

She also signalled proposals to reduce grid charges for energy-intensive industries through improved infrastructure productivity and to allow greater use of state aid to subsidise or compensate for price rises. The Commission will work closely with member states on the measures, while preserving the core of the EU’s Emissions Trading System (ETS).The leaders’ conclusions emphasised that any short-term relief must remain targeted, preserve market signals for the green transition and avoid distorting the single market.

Several member states have already acted or are preparing national steps while awaiting the Commission’s proposals:

Spain has announced a €5 billion package including a cut in VAT on fuel from 21% to 10% and further excise duty reductions to ease pressure on households and businesses.
Italy is considering cuts to excise duties on fuel and plans to tax windfall profits of companies benefiting from the price surge. It is also pushing, alongside several eastern and central European countries, for a broader review of the ETS impact on electricity prices.
Portugal has cut taxes on diesel.Austria’s chancellor has called for temporary reductions in petrol taxes.
Greece has capped profit margins on fuel and some groceries.
Similar fuel price caps or additional household subsidies are under discussion or already in place in countries including Croatia and Hungary.

The moves build on earlier EU efforts, such as the Commission’s Citizens’ Energy Package unveiled earlier this month, which aims to reduce taxes and levies on electricity bills and protect vulnerable consumers.

Europe finds itself in a significantly worse energy predicament than many other geographic regions in 2026, as it grapples with the compounded impacts of Russia’s ongoing war in Ukraine and the escalating U.S.-Israeli conflict with Iran, while steadfastly refusing to resume purchases from Russia even if President Trump were to lift U.S. sanctions on Russian energy exports. This principled stance leaves the continent heavily reliant on expensive LNG imports and other diversified sources amid depleted storage levels and disrupted Middle Eastern supply routes, in contrast to regions like Asia (where countries like China and India can more flexibly access discounted Russian volumes or domestic alternatives) or the United States (with its abundant domestic production cushioning price shocks).

Outside the EU, other major economies are also taking steps:

India has barred households with piped natural gas from accessing LPG cylinders, invoked emergency powers to boost domestic LPG production and cut industrial gas sales to prioritise supplies to 333 million homes. It is also reviewing exports.
China has banned refined fuel exports and released fertiliser reserves to support domestic needs.
South Korea is easing limits on coal-fired power and raising nuclear plant utilisation to as much as 80%, while considering energy vouchers for vulnerable households.
Brazil has eliminated federal taxes on diesel.

The EU’s response reflects a balancing act between immediate relief and long-term goals of reducing fossil-fuel dependence through renewables and diversification – a lesson from the 2022 energy crisis. Further details from the Commission are expected in the coming weeks.

Ten EU countries demand ETS overhaul as energy crisis features high at Brussels summit

With Reuters, with additional content by EUalive.

Caption: A price board at a petrol station in De Meern, Netherlands, 17 March 2026. The average recommended price for petrol in the Netherlands, set by major oil companies, rose to over 2.50 euros per liter on the same day. Pump prices have increased sharply in recent weeks due to the war in the Middle East. EPA/JEROEN JUMELET