New war, same weakness: when will Europe learn?

The Iran war is not one that any European sought or wanted, not least because the US government itself has been unable to produce a consistent rationale for launching it. As the Trump administration’s justifications have veered from regime change, to eliminating nuclear weapons, to missile threats, to pre-empting an imminent attack, the war already appears to be escalating into a wider regional conflict that risks exposing once again Europe’s geopolitical and economic vulnerability and the extent to which its strategic autonomy remains elusive.

The risks are clear enough. Most immediately, Europe is vulnerable to yet another energy price shock if Iran can sustain its disruption of Gulf energy supplies. Already, Iran has launched successful strikes on Saudi Arabia’s Ras Tanura oil facility and Qatar’s LNG hub, and has effectively closed the Strait of Hormuz to shipping. That has pushed oil prices up by 8% to $78 a barrel this week and European gas prices have risen 50%, albeit they remain far below their 2022 highs.

If sustained, higher energy prices could reignite inflation, leading the European Central Bank to raise interest rates and choking off an expected uptick in growth this year.

Weighing more heavily on European minds is the possible impact of the Iran War on Ukraine. It is true that the conflict threatens to deprive Russia of an ally – though not a particularly strategic one, given that Iran’s Shahed drones are now manufactured in Russia itself.

But for Moscow, these disadvantages are outweighed by the prospect of a windfall from higher oil prices, which will ease some of the pressure on the Russian public finances. Already the price of Russian crude has risen to $57 a barrel, not far off the $59 needed to balance the budget. President Volodymyr Zelenskyy has also warned that Russia will gain a battlefield advantage if a prolonged Iran war depletes Western stocks of weapons, crucially missile interceptors.

Russia will also be hoping to benefit from deepening splits in the transatlantic alliance. Those splits are widening, not least among Europeans themselves, which only fuels the perception of geopolitical irrelevance. Europeans who have spent four years insisting on the inviolability of the international rules-based order in the context of Ukraine’s defence risk driving accusations of hypocrisy and double standards if they ditch their attachment to international law, as German Chancellor Friedrich Merz did in response to the US and Israeli attack on Iran.

Yet they equally risk retaliation by America, on whose security guarantees Europe still depends if they withhold support for the US operation – as Spain is discovering.

And yet Europe also has much to gain if the US and Israel succeed in their goal of regime change – or at least creating the conditions for it. Few will mourn Ayatollah Ali Khamenei and other regime leaders killed in the opening salvo of the war.

Whether a more moderate or pragmatic leadership emerges from the wreckage – as opposed to an even harder-line one, or a descent into civil war – remains an open question. Iran experts are sceptical, noting that the regime is deeply entrenched and that there is no unifying figure for the opposition to coalesce around. But even an Iran no longer capable of threatening its neighbours could pave the way for lower global energy prices and open up commercial opportunities for European firms.

Now that the war is underway, Europe must fervently hope that the US and Israel swiftly achieve their objectives: to degrade Iran’s military capacity and create the conditions for benign regime change. That said, hope is about all that Europe can do, given that it lacks any real leverage.

Their challenge is to protect European citizens, not least in EU territory such as Cyprus, where Britain also has a sovereign base and which has come under drone attack, without getting drawn into a wider regional conflagration. That would risk diverting attention and draining resources from the existential conflict on its Eastern border.

At the same time, this crisis should serve as yet another wake-up call to tackle Europe’s strategic dependencies. That must start with accelerating the creation of a genuine pan-European energy market less reliant on imported fossil fuels. Europe is cushioned from a deeper gas price crisis by the huge increase in US exports of shale gas that has largely replaced Russian imports since 2022. But a prolonged closure of the Strait of Hormuz would see Europe compete with Asia for supplies, exposing it to volatile prices.

Amid the fracturing transatlantic alliance, Europe also needs to deepen the single market in defence manufacturing and step up production of its own military equipment – including developing long-term plans to reduce reliance on strategic enablers such as satellite systems and airlift capacity currently provided by the United States. This week’s decision by France to begin discussions over extending its nuclear umbrella to European partners was a significant step in the direction of a more sovereign Europe, less dependent on US security guarantees.

But real progress towards long-term strategic autonomy is unlikely without a significant expansion of common borrowing to fund common priorities such as defence, which cannot be delivered effectively at the fragmented national level. That will continue to be seen as a step too far by some member states – notably Germany, whose government has been vocal in ruling out further issuance of common debt.

Yet it was Chancellor Merz who this week pronounced the death rites of the rules-based international order when he disavowed international law. If Europe must now exist in a might-makes-right world, then Germany too must adapt.