European Energy Risk Index (EERI)

Today’s European Energy Risk Index signals a period of acute stress for the continent’s energy landscape, with market stability facing significant headwinds. The elevation into the SEVERE risk band reflects a confluence of geopolitical shocks that are straining both oil and gas flows into Europe. Industrial consumers and utilities are confronting heightened volatility, with forward curves for oil and refined products already reacting to the prospect of disrupted Hormuz shipments and new supply chain uncertainties. The transmission of risk through asset networks is pronounced, and contagion from adjacent regions—most notably the Black Sea and Middle East—has become a direct threat to European energy security. For European economies, this means not only higher input costs but also greater potential for supply interruptions as spring maintenance and restocking season approaches.

The surge in risk is underpinned by a cluster of destabilizing events. Goldman Sachs’ warning of oil prices breaching the $100/bbl threshold underscores the market’s sensitivity to the ongoing Iran war and the critical bottleneck at the Strait of Hormuz—a chokepoint through which a significant share of global oil flows. The situation is exacerbated by direct attacks on Ukrainian energy infrastructure, with Russia targeting multiple oblasts and causing widespread power outages. This adds a second vector of disruption, threatening both electricity supply and cross-border gas transit. Meanwhile, the US waiver permitting India to purchase stranded Russian oil highlights shifting trade dynamics, but it offers little immediate relief to European buyers who are structurally more exposed to Middle Eastern and Russian supply risks. The cumulative effect is a market caught between acute supply shocks and limited avenues for rapid diversification.

Looking ahead, European market participants should prepare for continued volatility and potential escalation. The next several weeks are critical: any sustained interruption of Hormuz flows could push oil benchmarks higher still, with downstream effects on diesel and jet fuel availability in Europe. The risk of further attacks on Ukrainian infrastructure remains elevated, particularly as the conflict intensifies with the spring thaw. While emergency policy measures—such as strategic stock releases or demand curtailment—may provide some buffer, these are stopgaps rather than solutions.