Comment: Europe’s Industrial Squeeze in the Year of $86 Brent

The World Bank’s April 2026 Commodity Markets Outlook forecasts Brent crude oil averaging $86 a barrel this year, up sharply from $69 in 2025. The forecast assumes that the most acute disruptions from the Iran war end in May and that shipping through the Strait of Hormuz gradually returns to pre-war levels by late 2026. For European industry — already operating with structurally higher energy costs than its American or Asian competitors — the question is whether the Continent’s industrial base can absorb a sustained shock of this magnitude and emerge competitive on the other side.

The scale of the shock

The Strait of Hormuz handles, in normal conditions, around 27 percent of seaborne crude oil trade and roughly 20 percent of global LNG trade. According to the World Bank’s analysis, attacks on energy infrastructure and shipping disruptions in the strait have triggered the largest oil supply shock on record, with an initial reduction in global oil supply of about 10 million barrels per day. Brent prices, near $72 a barrel in late February, surged above $84 by early March, and although they have moderated somewhat, they remained more than 50 percent higher in mid-April than at the start of the year.

The IEA’s executive director has described the situation as “the largest supply disruption in the history of the global oil market” and as “the greatest global energy security challenge” the agency has faced. Whatever the eventual trajectory of military operations in the Persian Gulf, the structural insight stands: a single chokepoint can produce a price shock of historic dimensions, and the European Union — for all its diversification efforts since 2022 — remains exposed.

The asymmetry with North America

The competitive implications for European industry are sharpest where energy costs constitute a large share of total production costs and where global competitors operate in fundamentally different energy markets. The North American natural gas market, supplied by domestic shale production and largely insulated from Asian LNG dynamics, has continued to deliver Henry Hub prices in the $3-4/MMBtu range while European TTF prices have traded materially above $13-15/MMBtu through most of the crisis. The resulting differential in industrial gas costs is the largest sustained gap recorded between the two regional benchmarks.

For energy-intensive industries — petrochemicals, fertilisers, primary aluminium, glass, ceramics — the gap is not a temporary inconvenience. It alters investment economics. New petrochemical capacity is now overwhelmingly being built in the Gulf, the United States and Asia. Fertiliser production, once distributed across the European industrial heartland, has consolidated into a smaller number of integrated facilities with the rest of the demand met by imports. The risk is not that European industry disappears overnight; it is that, decision by decision, the marginal investment is made elsewhere.

What the Commission can — and cannot — do

The Commission’s policy response operates on several fronts. The Affordable Energy Action Plan, announced in February 2025 and now in implementation, aims to lower industrial electricity prices through grid investment, accelerated renewables permitting and a more flexible state-aid framework. The Clean Industrial Deal, adopted earlier this year, provides a horizontal package of decarbonisation and competitiveness measures. The relaxation of the gas storage target from 90 percent to 80 percent for the 2026 winter season is a tactical adjustment to current market conditions. And the work on a European hydrogen market — still in its early stages — is intended to provide a longer-horizon answer to the dependence on fossil-fuel imports.

None of these instruments will neutralise the immediate competitive impact of $86 Brent crude and the corresponding gas-price elevation. They are, at best, palliatives. The honest assessment is that the European industrial base is now in a period of accelerated structural adjustment. The decisions taken in 2026 — on trade defence, on energy infrastructure, on industrial state aid, on the speed and modalities of decarbonisation — will determine the shape of the industrial map that emerges from this shock.

The wider lesson

If there is a single editorial conclusion to draw from the events of the past three months, it is this: an economic model that relies on cheap external energy is no longer compatible with the security environment in which the European Union operates. The lesson of the Russia gas shock of 2022-2023 has been reinforced, not eased, by the Iran war. The serious response is not to wait for prices to settle and resume previous habits. It is to accept that the cost structure of European industry has to be rebuilt around energy autonomy, and to use the present pressure to accelerate the investment that this requires.

Sources: World Bank Commodity Markets Outlook April 2026; IEA Middle East and Global Energy Markets analysis; Bruegel; Center on Global Energy Policy at Columbia University.