Gulf-Eurasian energy crunch pushes Europe to the edge of an inflationary crisis

What Happened

Europe's oil and gas supply is being simultaneously disrupted by conflicts in the Gulf and Eurasia. Saudi Arabia told European refineries on Friday not to expect any crude oil deliveries next month. Houthi forces advanced rapidly along Yemen's southwestern Red Sea coast, capturing the Port of Mokha on 10 September, seizing Mayun/Perim Island inside the Bab el-Mandeb Strait on 11 September, and reportedly taking Greater and Lesser Hanish Islands on 14 September, according to Middle East Eye. War-risk insurance premiums for Red Sea transits have surged, and shipping companies are diverting vessels around the Cape of Good Hope, adding 10–14 days to voyages. The article reports the Strait of Hormuz was closed from February to early September, removing an estimated 17–19 million barrels per day from global markets. Saudi Arabia had mitigated part of the shock by diverting crude through its East–West Pipeline to the Yanbu export terminal on the Red Sea, increasing flows from roughly two million barrels per day at the start of the year to around six million barrels per day, but a drone attack on a pumping station on 11 September prompted the immediate closure of the East-West line and it is not clear when it will reopen. Ukrainian strikes on Russian refineries and export terminals have constrained Russian supply, and Kazakhstan's main export route via the CPC pipeline to Novorossiysk is vulnerable to Ukrainian attack. A Ukrainian drone struck an Iranian vessel in the Caspian Sea on 25 July, proving such attacks are possible. Eurozone inflation is accelerating at 3.3 percent and energy inflation at 14.3 percent, according to Costantinos Stambolis, Chairman of the Institute of Energy for South-East Europe.

Key Actors

Why It Matters

The combined disruptions in the Red Sea, Strait of Hormuz, Black Sea, and Caspian Sea expose Europe's shallow strategic reserves and dependence on spot markets. Houthi territorial control over Bab el-Mandeb allows them to extract strategic value through insurance costs and shipping diversions even without a physical closure. With Russian and Gulf supplies simultaneously constrained, Europe faces an inflationary crisis where diesel, electricity, and food prices feed directly from reduced supply and higher shipping costs.

Watch For

Monitor whether the Saudi East–West Pipeline reopens and when Saudi deliveries to Europe resume. Watch insurance companies' war-risk coverage decisions for Bab el-Mandeb and shipping companies' routing choices around the Cape of Good Hope. Track potential Ukrainian strikes on Novorossiysk and the CPC pipeline, as well as any further attacks on Caspian shipping. Eurozone inflation and energy inflation data will indicate whether the crisis intensifies.