Europe’s power-price divergence in 2026 is revealing a hard truth about the continent’s energy transition: the countries that remain most dependent on gas are once again the ones absorbing the worst of an external shock. Wholesale electricity prices in Hungary, Italy and Romania have all risen by at least 12% from last year’s average levels, while Spain and Portugal have recorded declines over the same period.

That gap is not accidental. It reflects the very different structures of national power systems and shows that the U.S.-Israeli war on Iran is hitting Europe unevenly, with the most gas-reliant economies suffering the largest cost increases.

Europe’s carbon market has become the central battleground in the EU’s attempt to contain the economic fallout from the Iran war, and Tuesday’s sharp price drop showed just how seriously traders are taking the prospect of political intervention.

The benchmark EU carbon contract fell more than 5% intraday after Commission President Ursula von der Leyen told EU leaders the bloc was considering releasing more emissions permits through the market’s reserve system, moderating the planned phase-down of free allowances for industry, and using a review due in July to rethink some of the supply tightening scheduled after 2030. The contract later traded around €66.33 a ton after touching €64.93, its lowest level since April 2025.

The Strait of Hormuz shock is exactly the kind of “fat tail” event that energy systems built around liquid fuels are structurally unable to hedge. It is not just a price spike; it is a logistics-and-insurance failure that rapidly becomes a political crisis because gasoline and diesel sit directly in the consumer’s face and under the freight system.

Electrification is one of the few strategies that doesn’t merely diversify suppliers or build bigger stockpiles, but shrinks the exposed surface area of the economy to oil chokepoints altogether. Governments keep treating Hormuz as an occasional crisis to be managed with emergency releases, when it should be treated as a recurring systemic risk that merits permanent risk reduction.