Governments across Europe are being urged to overhaul their response to the latest energy crisis, with economists warning that current policies risk prolonging the disruption caused by tensions around the Strait of Hormuz.
The renewed pressure on global energy markets follows restrictions and instability in the vital shipping route, a corridor that typically carries about one-fifth of the world’s oil supply. The situation has triggered what analysts describe as Europe’s second major energy shock in just four years.
Economist Judith Arnal argued that many governments are repeating policy mistakes seen during the 2022 energy crisis. She said widespread measures such as tax cuts and price caps may appear helpful but ultimately weaken the price signals that encourage reduced energy consumption.
Her concerns echo those of Pierre Wunsch, who recently warned that broad subsidies could worsen the crisis rather than ease it. He stressed that lowering demand should be the priority, cautioning that generous support measures risk increasing consumption at a time when supply remains constrained.
A review of national responses across countries including Germany, France, Italy, Spain, Poland and Hungary suggests that none fully meet the European Central Bank’s “triple-T” standard of being targeted, tailored and temporary.
Countries such as Hungary and Poland have introduced direct fuel price caps, which analysts say suppress market signals entirely and often benefit higher-consuming households the most. Others, including Spain, Italy and Germany, have relied on tax reductions that also tend to favour those who use more energy.
There are, however, some exceptions. Spain’s targeted support for vulnerable households has been highlighted as a more effective approach, while Italy’s sector-specific tax credits aim to support industries most exposed to rising costs. France has taken a different route, avoiding direct price controls and instead focusing on inspections, liquidity support and administrative measures.
The debate has also turned to how governments should fund their interventions. Several European nations have called for a regional tax on excess profits made by energy companies, though experts caution that any such measure must be carefully designed to avoid market distortions.
Analysts warn that unless policies shift quickly, the combination of constrained supply and misdirected support could deepen the crisis. With uncertainty still surrounding energy flows through the Strait of Hormuz, the effectiveness of government responses is expected to play a key role in shaping Europe’s economic outlook in the months ahead.
