How the Iran War Is Reshaping Europe's Energy Markets and Pushing Drivers Toward EVs

Crucially, the nature of this crisis differs from 2022. Unlike the Russian gas cutoff, the EU's gas supply is not in immediate physical danger because Iran is not a major direct gas supplier. However, a Bruegel policy brief warned that the EU's heavy dependence on global gas imports means it is acutely exposed to the price fallout. A doubling of gas prices, it notes, could add about €100 billion to European gas import costs over 12 months .

UK Fuel Prices Hit Levels Not Seen Since 2022

The oil price surge has fed directly into forecourt prices across the UK. Petrol prices climbed from around £1.32 per litre before the conflict to an average of 159.4p per litre by the end of May 2026 . According to an ICAEW breakdown, on May 26 the average price for petrol was 159.6p per litre, with wholesale costs accounting for 63.1p (39%) and taxes making up more than half the final price . Diesel reached 184.9p per litre on the same date .

The RAC reported that motorists paid an additional £307 million at the pumps in the first month alone . By mid-May, prices had eclipsed the previous crisis peak, reaching 158.5p per litre—the highest since December 2022 . Diesel drivers have been hit especially hard: the cost of filling a typical 55-litre family diesel car rose by as much as £11 per tank within the first three weeks .

Despite brief dips following ceasefire talks in April, prices remain volatile. Analysis from PetrolPrices.co.uk showed that a sustained 7% rise in Brent crude—such as the jump from $100 to $107 in mid-May—translates to roughly 3-5p more per litre at the pump over the following month .

The Electric Vehicle Advantage Widens Dramatically

One of the most significant consequences of the fuel crisis has been the rapidly widening cost advantage of electric vehicles. Analysis by the Energy and Climate Intelligence Unit (ECIU) found that the oil price rise added £1.7 billion to the cost of running the UK's petrol and diesel cars in the first 100 days of the conflict. Petrol car drivers paid £175 more than they would have in an equivalent EV over that same period, while diesel drivers paid £255 more .

This cost differential is even starker at the European level. Clean transport group Transport & Environment (T&E) calculated that with oil prices above $100 a barrel, fuelling an average petrol car would cost about €14.20 per 100km, compared to just €3.90 for an equivalent electric vehicle—meaning petrol car drivers were being hit roughly five times harder than EV drivers . A separate analysis from Bank of America estimated a five-year total cost advantage of roughly €2,500 to €8,500 for an electric Volkswagen ID.3 compared with a petrol Golf, depending on subsidies .

Consumer behaviour is already shifting. Sales of fully electric cars in Europe's main auto markets jumped by almost a third in Q1 2026 as drivers actively sought alternatives to expensive combustion engines . Enquiries for electric cars in the UK rose 23% since the start of the conflict . The used EV market has also surged, with online car platforms reporting a sharp increase in demand as petrol prices breached the psychological €2 per litre mark in several EU countries .

As the European Business Magazine noted, the pattern mirrors the 1970s oil crisis shift toward fuel-efficient vehicles—but this time the alternative, electric cars, is already widely available .

Europe's Policy Response: National Measures and the 'AccelerateEU' Plan

Faced with the most severe energy price shock in four years, EU member states initially responded with a patchwork of national measures. Euronews documented how governments turned to tax cuts, price caps, and subsidy packages while waiting for a coordinated EU-level response .

Spain was among the most aggressive responders, passing a €5 billion plan centred on sweeping tax cuts. The government reduced VAT on all forms of energy from 21% to 10%, including motor fuels, electricity, natural gas, and butane, cutting electricity bills by an estimated 13% and making petrol and diesel around 30 cents cheaper per litre .

At the EU level, energy ministers held emergency talks on March 31, 2026. While they confirmed that the union's security of supply remained relatively safeguarded thanks to diversification in recent years, they also agreed that ensuring supply for the 2026-2027 winter was a key priority and that coordinated national and EU measures must reinforce each other .

The centrepiece of the European response came on April 22, when the Commission unveiled the 'AccelerateEU' package, a strategy comprising 44 specific actions . The package aimed to provide both immediate relief and long-term structural change. Key measures included cutting electricity taxes to ensure electricity is taxed less than fossil fuels, coordinating the refill of depleted gas storage facilities to avoid member states competing and driving up prices, and optimising the distribution of jet fuel between EU countries to prevent shortages .

The Commission also took the notable step of urging member states to lower gas storage filling targets to 80% of capacity, ten percentage points below official targets, to curb demand-side pressure . Unlike the 2022 crisis, the EU avoided major market interventions such as capping gas prices or taxing windfall profits this time around, instead focusing on structural demand reduction and accelerating the clean energy transition .

EU Energy Commissioner Dan Jørgensen warned that "skyrocketing oil and gas prices won't return to normal levels any time soon, even if peace is declared tomorrow," citing pressure on diesel and jet fuel supply and increasing constraints in global gas markets that were feeding into higher electricity prices . The Commission framed the crisis as a strategic turning point: "This must be a wake-up call and a turning point—when Europe steps away from fossil fuel dependence, and steps towards clean energy autonomy" .

A Bruegel policy brief reinforced this message, arguing that genuine European energy sovereignty will not emerge through substituting fossil fuel suppliers but through the accelerated electrification of the economy . The war in Iran may ultimately do what years of climate policy struggled to achieve: drive a lasting shift in both consumer behaviour and government strategy toward a less fossil-dependent future.