The global disruption triggered by the US-Israeli war against Iran has again exposed Europe’s fossil-fuel vulnerability. The new energy crisis has caused diesel and petrol prices to soar across Europe by an average of 26% and 12% respectively since the start of the war. The main European natural gas price benchmark – the TTF – has seen a renewed wave of volatility, doubling from €30 to €60 per megawatt hour in the first weeks of the war, before stabilising at around €40 per megawatt hour.
According to Bruegel’s 2026 European energy crisis fiscal response tracker, European governments have so far committed more than €11 billion in fiscal measures to cushion households and businesses. In absolute numbers, Spain and Germany together have committed more than half of the total; relative to GDP, Greece, Spain, Bulgaria and Ireland have committed the most.
However, interventions by many countries, including Germany, Italy and Poland, have so far focused on fuel tax cuts. These risk blurring the price signal to consumers, ultimately increasing energy consumption during a period of scarcity.
Such measures contradict the recommendations of the European Commission, European Central Bank and International Monetary Fund that caution against untargeted fiscal responses. Governments should avoid distorting market price signals and instead focus on aiding the most vulnerable groups and supporting investments that will ultimately cut fossil-fuel consumption and advance Europe’s electrification. The measures also show that few European governments have learned from the past. During the 2022 energy crisis, fuel tax cuts were only one element of a broader policy mix. For example, Germany’s response then included lump-sum payments for households and subsidies for public transport tickets, alongside fuel tax cuts.
Among those taking a more targeted approach this time round are the Netherlands, Belgium and the United Kingdom, which have announced relief for heating costs for vulnerable groups. The Netherlands has gone further, offering structural support for energy-efficiency improvements. Likewise, Sweden is giving out lump-sum electricity cost subsidies to households, thereby still encouraging energy savings. Sweden has also allocated additional funds for electric vehicle subsidies and to help government agencies reduce their fossil-fuel consumption.
In addition to national-level measures, the Commission adopted the Middle East crisis Temporary State aid Framework (METSAF) on 29 April, targeting the fishery, transport and agriculture sectors. The Commission also decided to adapt the Clean Industrial Deal State Aid Framework (CISAF) so EU countries can now compensate 70% (up from 50%) of energy-intensive industries’ electricity costs. While these measures are targeted and temporary – set to expire at the end of 2026 – they lack incentives for companies to invest in energy-saving measures. Most likely they will be used only by countries with more fiscal space.
Public finances are already stretched by the legacy of the COVID-19 pandemic and the 2022 energy crisis, during which European governments spent hundreds of billions of euros on crisis measures. Amid the uncertainty from the conflict in the Middle East, European governments should focus on targeted and temporary relief measures – not on price-distorting tax cuts. The present shock should also be treated as a clear signal for structural change: accelerating electrification is essential for Europe to become more resilient and to reduce its exposure to volatile global oil and gas markets.
About the authors
Thomas Mramor is a Research Assistant at Bruegel. He is working on energy and climate topics.
Alexander Roth is an Affiliate Fellow at Bruegel. He specialises in energy and climate policy.
Simone Tagliapietra is a Senior Fellow at Bruegel. He specialises in EU climate, energy and industrial policy.