What is driving Europe’s deepening energy crisis, how are surging oil, gas, electricity, gasoline, diesel, and heating oil prices affecting consumers and economies in Greece, Cyprus, North Macedonia, and Italy, what emergency measures are governments considering or implementing,

Europe’s energy shock is primarily a supply-and-security crisis: disruption to Persian Gulf infrastructure and shipping through the Strait of Hormuz has constricted global oil and LNG flows, while Europe is entering winter with low gas inventories and less room to replace Russian supply. The result is higher household fuel and heating bills, costlier electricity and transport, weaker real incomes, and renewed inflation pressure. 315

What is driving it

• Hormuz disruption has curtailed roughly 15% of seaborne oil and 20% of seaborne LNG flows, while the ECB estimates that around 20 million barrels per day—about one-fifth of global oil supply—was interrupted. This raises crude, LNG, shipping, insurance and refined-product prices simultaneously. 312
• Gas-price increases feed into wholesale electricity prices because gas-fired generation is often the marginal power source; oil then raises gasoline, diesel and heating-oil costs directly.
• The problem is amplified by unusually low EU gas stocks heading into winter and inadequate investment in alternative supply, renewables and electricity grids, according to the European Court of Auditors. 15
• The EU’s legally binding Russian-gas phaseout adds a near-term replacement challenge: Russian LNG is due to be fully banned by the end of 2026, while the broader pipeline-gas phaseout follows in 2027. 57

Effects in Greece, Cyprus, North Macedonia and Italy

• Greece: Higher petrol, diesel and heating-oil costs hit car-dependent households, islands and tourism-related transport; higher electricity and food costs erode purchasing power. Energy-intensive businesses, farmers and ferry operators face higher operating costs. Greece imposed a three-month cap on fuel and supermarket profit margins to curb speculation and has used diesel support, agricultural aid and strategic-oil releases. 43
• Cyprus: As an island with limited energy interconnection and high reliance on imported fuels, it is especially exposed to oil-product and shipping-cost shocks. Higher power and transport bills can rapidly pass through to households, tourism and small businesses. The available evidence does not substantiate a specific new Cyprus measure or price level.
• North Macedonia: Higher imported electricity, gas and oil costs pressure household budgets and industrial competitiveness, while also straining public finances if tariffs are subsidised. As it is outside the euro area, it also faces exchange-rate and financing vulnerabilities. The available evidence does not substantiate a specific new emergency intervention.
• Italy: Higher gas and electricity costs weigh heavily on manufacturing, logistics, agriculture and households, while diesel and gasoline costs raise freight and food prices. Its large public debt makes broad fiscal subsidies more financially sensitive, particularly if market interest rates rise. The available evidence does not substantiate a specific current Italian emergency package.

Government response

• At EU level, governments are considering a revival of measures used during the 2022 gas crisis, potentially including coordinated demand reduction, storage and supply-security actions, consumer support and measures against excessive market behaviour. 3
• The most immediate national tools are targeted fuel or heating support, electricity-bill relief, temporary tax or levy reductions, price/profit controls, aid for farmers and energy-intensive firms, strategic petroleum releases, and accelerated renewable, grid and LNG-infrastructure projects.
• These measures reduce the immediate blow to consumers, but broad subsidies can be expensive, weaken incentives to conserve energy, and—if not targeted—add to inflationary demand.

Inflation, the ECB and markets

• The shock has already pushed euro-area inflation higher through energy: energy-price inflation reached 10.9% in April after 5.1% in March, while food inflation also rose. 10
• The ECB’s March baseline expected oil around $90 per barrel and gas around €50/MWh in the second quarter, with the energy shock lifting inflation and reducing purchasing power. A longer or larger disruption would make that baseline too benign. 8
• The policy dilemma is stagflationary: higher energy prices lower output and real incomes, but persistent inflation or wage/price spillovers can require tighter monetary policy. The ECB raised its key rates by 25 basis points in June, taking the deposit rate to 2.25%. 6
• Financial-market channels include higher sovereign and corporate borrowing costs, weaker equities for energy-intensive sectors, pressure on consumer-facing firms, and wider risk premia. Market-based corporate-debt issuance costs rose to 3.9% in March from 3.5% in February. 10

Why winter fears are severe

• Low storage: Gas stocks are a buffer against cold weather, supply outages and LNG-delivery delays. Lower starting stocks mean Europe must compete more aggressively for spot LNG precisely when global demand is highest. 15
• Persian Gulf risk: Damage to energy infrastructure and restricted Hormuz transit reduce physical supply and increase freight, insurance and delivery-risk premiums even if some barrels and cargoes are rerouted. 312
• REPowerEU implementation gap: Auditors say the EU is not investing enough to meet the plan’s goals, leaving diversification, renewables and grid expansion behind what is needed for durable resilience. 15
• Russian LNG ban: Ending Russian LNG is strategically consistent with reducing dependence, but it removes a source of flexible supply just as other LNG routes are vulnerable. Without sufficient replacement contracts, storage and infrastructure, the transition raises winter price and scarcity risk. 57

The central uncertainty is duration: a short-lived Hormuz disruption can be cushioned by inventories, strategic releases and rerouting; a prolonged disruption combined with a cold winter and reduced Russian LNG availability could produce much sharper rationing risk, fiscal costs and inflation pressure.