(The opinions expressed here are those of the author, a

columnist for Reuters)

By Ron Bousso

HOUSTON, March 26 (Reuters) - The European Union may be

forced to scale back its flagship climate policies and

geopolitical aims as the Iran war drives up energy prices - with

lasting consequences for the bloc's energy strategy.

The energy crunch sparked by the conflict, now in its fourth

week, has rattled Europe, which is heavily dependent on imported

oil and gas. Around 8% of its liquefied natural gas (LNG) comes

from the Middle East through the all-important Strait of Hormuz,

which remains mostly blocked.

European benchmark gas prices have jumped more than

60% since the conflict began, to above 50 euros per megawatt

hour.

That is still far below the eye-watering peak of nearly 300

euros per MWh seen after Russia's invasion of Ukraine in 2022,

when pipeline gas supplies collapsed.

That earlier supply shock triggered a roughly 20% drop in

consumption as governments imposed energy-saving measures and

factories shut down in the face of uncompetitive power and gas

costs.

While the EU has sharply expanded renewable energy deployment

since then, with wind and solar generating more electricity than

fossil fuels in Europe for the first time in 2025, gas still

accounts for around a fifth of the bloc's total energy

consumption, reflecting the fuel's dominant role in heating and

industry.

Europe has also dramatically reduced its exposure to Russian

energy, but it has instead become heavily dependent on the U.S.,

which supplied nearly 60% of the bloc's LNG in 2025, according

to Kpler data. Russia was the second-largest source at 13%.

So even though Europe's gas market today looks very

different than it did in 2022, these dependencies mean it is no

less exposed to external shocks.

BAD OPTIONS

While Europe does have certain advantages today compared to

four years ago - including greater renewables capacity and a

more diverse pool of gas supplies - the region enters this

crisis with a heavy dependence on imports.

Norway, Europe's largest oil and gas producer, was able to move

quickly to cushion the 2022 blow, ramping up output by nearly

10% to offset some of the loss of Russian supply. But that

buffer is now largely exhausted.

Norway's state-owned Equinor ( EQNR ) is already producing at

capacity, which reached 2.14 million barrels of oil equivalent

per day in 2025 - a level it aims to sustain through 2035, CEO

Anders Opedal told Reuters at the CERAWeek conference.

That leaves Europe with few immediate levers to pull to

offset the loss of Middle East supply.

One option would be delaying plans to both phase out Russian

LNG imports by the end of this year and end all remaining

Russian pipeline gas imports by September 30, 2027. But doing so

would likely prove politically toxic for many governments - as

it would be seen as a gift to Russian President Vladimir Putin.

Another option would be to soften a raft of climate policies

designed to reduce emissions by steadily making fossil fuels

more expensive.

These include easing regulations around carbon pricing for

regional polluters along with energy-efficiency mandates,

methane-emissions limits and renewable-deployment targets. The

bloc could also ease or delay its landmark Carbon Border

Adjustment Mechanism - a carbon tax on some energy-intensive

imports.

The EU's Corporate Sustainability Due Diligence Directive,

which requires companies to address environmental and human

rights risks in their supply chains, has long been a point of

friction with key LNG suppliers such as the U.S. and Qatar. It

might end up getting scrapped.

'OVERESTIMATED SUSTAINABILITY'

European policymakers are increasingly aware that some of

these environmental measures are pushing up energy costs and

undermining industrial competitiveness.

Germany's economy and energy minister, Katherina Reiche,

said on Tuesday that the EU's energy transition over the past

two decades had produced higher systemic costs.

"We overestimated sustainability, we underestimated

affordability. It was a mistake we're going to correct," Reiche

toldthe CERAWeek conference in Houston, adding that measures

could include cutting subsidies for offshore wind and other

low-carbon technologies.

Germany, the EU's largest economy, plans to build around 36

gigawatts of gas-fired power capacity over the next few years,

she added, a striking signal of how energy security is being

prioritized over climate goals.

It is highly unclear when the Iran war will end - with

Washington and Tehran sending mixed signals this week - but even

if the conflict does wrap up quickly, the damage to gas supplies

will be felt for years. Iranian strikes on Qatar's vast Ras

Laffan LNG complex last week knocked out around 17% of capacity,

creating a lasting hole in global gas markets.

So Europe will be forced to make some hard choices in the

coming months - one of which may be sacrificing a large chunk of

its climate ambitions.

(The opinions expressed here are those of Ron Bousso, a

columnist for Reuters.)

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(Ron Bousso

Editing by Marguerita Choy)