European ministers call for profit caps on energy companies as Iran war drives price surge

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The finance ministers of Spain and four other European countries are urging the European Union to impose a bloc-wide windfall tax on energy companies, concerned that surging oil and gas prices driven by the war in Iran will fuel inflation and strain households.

Spanish Economy Minister Carlos Cuerpo said Saturday that his counterparts from Germany, Italy, Portugal and Austria had signed a letter to the European Commission citing “market distortions” caused by the price spike.

“The conflict in the Middle East has caused oil prices to rise, placing a significant burden on the European economy and on European citizens,” the letter, dated Friday and made public by Cuerpo in an online post, said.

“It is important to ensure that this burden is distributed fairly,” it added.

Europe is largely dependent on imported oil and gas, leaving it vulnerable to external shocks. In 2022, turmoil in energy markets following Russia’s full-scale invasion of Ukraine pushed inflation into double digits in many European countries.

At the time, the EU imposed a “solidarity contribution” that included caps on excess energy profits.

“Given the current market distortions and fiscal constraints, the European Commission should swiftly develop a similar EU-wide contribution instrument,” the letter said. “It would also send a clear message that those who profit from the consequences of the war must do their part to ease the burden on the general public.”

Driven largely by higher oil prices, the annual inflation rate in the 21 countries that use the euro rose to 2.5% in March, from 1.9% in February.

Iran has blocked most tanker traffic through the Strait of Hormuz — a chokepoint for about 20% of global oil and gas — in a move that threatens to stress fuel markets for months.

European Union Energy Commissioner Dan Jorgensen warned this week that disruption caused by the closure means fuel prices are unlikely to “go back to normal in a foreseeable future.”