Energy prices surge! Finance ministers of five EU countries jointly propose

Ask AI · Can the EU’s windfall tax proposal ease household energy cost pressures?

The conflict between the US, Israel, and Iran is shaking up the global energy market. The fighting has disrupted freight transport in the Gulf region and has caused what the International Energy Agency (IEA) calls the largest oil supply disruption in history. Oil and natural gas prices have surged sharply, and EU countries are trying to take measures to mitigate the impact of high fuel prices on the refueling costs of people and businesses. Recently, finance ministers from five EU countries floated a major proposal: imposing a windfall tax on energy companies to respond to fuel price increases triggered by the Middle East conflict and to smooth out the shock of rising global energy prices on EU companies and households.

As fighting in the Middle East escalates—from the US and Israel’s hardline stance toward Iran to the continual deterioration of the regional situation—the global energy market is on edge. Because it is highly dependent on imported fuels, the EU has become the victim of rising energy prices. Data shows that since February 28, London Brent crude oil prices have risen by 51%, while Europe’s benchmark TTF natural gas prices have risen by 60%. From this, one can see the powerful shock that war and conflict have dealt to global supply chains.

Energy bills are only the tip of the iceberg. Data released by Eurostat earlier shows that, affected by the Middle East fighting, energy prices in the euro area rose by 4.9% year-on-year in March, while the inflation rate climbed to 2.5%, far higher than the 1.9% in February. The EU commissioner responsible for energy, Dan Jørgensen, warned that for the foreseeable period ahead, oil prices are unlikely to return to the levels seen earlier.

As Europe’s largest economy, Germany is one of the countries hit more severely. On April 1, five major German economic research institutes released a joint economic forecast report stating that, affected by the energy price increases brought about by the Middle East fighting, Germany’s economic growth in 2026 is expected to be 0.6%, a sharp downward revision from the 1.3% forecast made last autumn. The report said that the recent sharp rise in energy prices has significantly pushed up inflation, weakened residents’ purchasing power, and dampened Germany’s economic recovery. The report projects that Germany’s inflation rate will rise to 2.9% in the second quarter of this year, and that the average inflation rates in 2026 and 2027 will reach 2.8% and 2.9%, respectively.

With energy prices rising “rocket-like,” and living costs surging, widespread anxiety has been triggered. On April 5, multiple anti-war organizations held a protest march in Berlin, the German capital, denouncing US and Israeli military strikes on Iran. The march began at Berlin Central Station, went past the Chancellery and the Bundestag, and ultimately ended at Pariser Platz in front of the Brandenburg Gate—just dozens of meters from the US Embassy in Germany. This was Berlin’s third recent protest activity targeting US-Israel strikes on Iran. Protesters held placards, chanted slogans, and emphasized that military actions violate international law and endanger regional security.

At the end of March, in Italy, Rome saw more than 25,000 people take to the streets to protest US and Israeli military actions against Iran. The protest procession walked from Republic Square all the way to Saint John’s Square. One protester said that in war, it is workers, ordinary citizens, and all society’s most vulnerable groups that pay the highest price.

However, while global natural gas and oil prices are rising and ordinary households are facing a surge in heating and transportation costs, energy companies’ profits are ballooning sharply, sparking questions about social fairness. This not only makes people furious, but also puts the government under significant pressure.

In a joint letter, finance ministers from Germany, Italy, Spain, Portugal, and Austria recently called for a special tax on windfall gains by energy companies. According to AFP, reported on the 4th, the joint request from these five countries was submitted through a letter addressed to EU climate commissioner Wopke Hoekstra. Quirpo, Spain’s minister for the economy, trade, and business, said on social media that this would “relieve the burden on consumers and taxpayers.” The five ministers emphasized that this tax would deliver a clear message—that the beneficiaries of the Middle East conflict have an obligation to “do their part to ease public pressure.”

The five EU finance ministers pointed out that after the Russia-Ukraine conflict broke out in 2022, the EU had previously implemented similar emergency tax policies to deal with the steadily rising energy prices in the EU. According to data released by the European Commission, during the period when energy prices surged due to the Russia-Ukraine conflict, this mechanism levied taxes totaling about 28 billion euros on fossil fuel profits of multinational energy giants.

A research report released at the end of March by Morningstar, an independent investment research and fund rating agency in the United States, said that as the Middle East conflict drives up energy costs and inflation, Europe is facing new vulnerabilities. Morningstar’s stock analyst, Tankred Fluhs, said that European natural gas prices have remained high after a cold winter, and that disruptions in Qatar Energy Company’s liquefied natural gas production caused by the Middle East conflict have further pushed up energy prices. European stock and bond markets also reacted strongly. He also said that for Europe, the impact of this situation goes far beyond short-term fluctuations in the capital markets. Ultimately, the rise in energy prices will be passed on to household heating costs and overall consumer prices.

Source: Financial Times client

Reporter: Han Xuemeng

Editor: Yunyang