Energy Costs Surge $8.5 Billion for Spanish Industry as Iran War Pushes Oil Above $100 and Factories Curtail Production

The Iran war has triggered an energy cost shock across Southern Europe. Higher energy prices resulting from the conflict could add nearly €7.4 billion ($8.5 billion) to Spanish manufacturers' costs through the end of 2026, according to the Alliance for the Competitiveness of Spanish Industry, a lobby group representing 60% of Spain's gross industrial product. Of that total, gas accounts for €4.2 billion and electricity for €3.2 billion, with 70% of the impact expected between September and December.

Day-ahead electricity prices have averaged nearly €150 per megawatt-hour so far in September 2026, up sharply from €61 in September 2025 — a 146% increase. Gas prices have exceeded €80 per megawatt-hour, and oil prices have risen above $100 a barrel following Houthi attacks on Saudi energy infrastructure while shipping through the Strait of Hormuz remains heavily disrupted.

This is not a distant macroeconomic story. It is already forcing Spanish steelmakers to temporarily halt production during peak electricity price hours. Here is what is driving the crisis and what it means for businesses, investors, and European competitiveness.

Key Takeaways

• Spanish industry energy overcost: €7.4 billion ($8.5 billion) through end of 2026, with €4.2 billion from gas and €3.2 billion from electricity.
• Electricity price surge: Day-ahead prices averaged nearly €150/MWh in September 2026, up from €61/MWh a year earlier — a 146% increase.
• Steel sector impact: €658 million ($749 million) in additional energy costs between March and December 2026.
• Production curtailments: Spanish steelmakers are already halting production during peak price hours.
• Oil price: Above $100 per barrel, with the Strait of Hormuz — carrying 20% of globally traded energy — heavily disrupted.

Why Are Energy Prices So High in 2026?

The primary driver is the Iran war and its impact on global energy flows. The Strait of Hormuz, a critical artery for oil exports from the Middle East, remains heavily disrupted. Around 800 commercial vessels, including nearly 400 oil tankers, have been unable to transit safely through the strait, which normally carries more than 20% of globally traded energy.

Oil prices have responded sharply. Crude has risen above $100 a barrel, with some analysts warning of $120 or higher if disruptions persist. The IW German Economic Institute estimates that Germany's economy alone could face a €40 billion ($46 billion) hit over two years if oil stays at $100 a barrel.

Natural gas prices have followed oil higher. In Spain, gas prices have exceeded €80/MWh, more than double pre-crisis levels. Electricity prices, which are partly set by gas-fired generation, have surged in tandem.

The Strait of Hormuz Is the Chokepoint

The Strait of Hormuz is the world's most important energy chokepoint. It connects the Persian Gulf to the Arabian Sea and carries approximately 20 million barrels of oil per day under normal conditions. Since the conflict escalated, oil flows through the strait have ranged from 6 million to 10 million barrels per day — a fraction of normal levels.

The disruption has forced tankers to disable automatic identification system signals to avoid targeting, adding risk premiums to shipping costs. Insurance costs for vessels transiting the region have skyrocketed, further raising the cost of delivered energy.

How Is Spain's Steel Industry Responding?

The Spanish steel industry is on the front line of the energy crisis. UNESID, the Spanish steelmakers association, estimates the sector will face around €658 million ($749 million) in additional energy costs between March and December 2026. Of that amount, approximately €452 million is expected in the September-December period alone.

Cost pressures are already prompting steelmakers to halt production during hours when electricity prices are highest. UNESID warns that such curtailments could increase if current price levels persist.

"The steel industry cannot indefinitely absorb energy costs that undermine our ability to produce, invest and compete," said Carola Hermoso, general director of UNESID. The association has called for an emergency energy plan to be implemented in 2026 and extended into 2027.

Key Demands From Industry

• Increase funding for indirect CO₂ cost compensation to at least €1 billion.
• Make the 80% reduction in electricity grid charges for energy-intensive industries permanent.
• Establish a competitive benchmark of €50/MWh for total electricity costs for industry.
• Implement structural measures to ensure stable, predictable, and competitive energy supplies.

Energy Cost Data: Key Figures at a Glance

What Does This Mean for European Industrial Competitiveness?

The energy shock is accelerating a trend that was already visible before the Iran war: Europe's energy-intensive industries are losing competitiveness against global rivals. Electricity prices for energy-intensive industries in the EU increased by around 53% between 2019 and 2024, according to European Central Bank research, while household prices rose 33%.

Germany's economy, Europe's largest, is particularly exposed. The IW German Economic Institute estimates a €40 billion ($46 billion) hit over two years if oil stays at $100 a barrel. Industries from chemicals and plastics to metals, textiles, and toys are all affected.

An alliance of 13 major European industrial players has warned that persistently high electricity prices are undermining both industrial competitiveness and the viability of electrification efforts. The group supports a reference price of €50/MWh as the maximum total electricity cost for industry.

A Two-Speed Europe

Spain is in a relatively better position than some of its neighbors due to the rapid expansion of renewable energy, which has reduced dependence on gas in electricity price formation. But the country's industry remains heavily exposed to gas prices, and the September surge has erased much of that advantage.

The crisis is creating a two-speed dynamic within Europe. Countries with diversified energy sources and strong renewable capacity are weathering the shock better than those reliant on imported fossil fuels. But no major European economy is immune to oil above $100 and gas above €80/MWh.

How Does This Affect Small Businesses and Manufacturers?

Small and medium-sized manufacturers are the most vulnerable. Unlike large corporations with hedging strategies and long-term supply contracts, SMEs often buy energy on spot markets and have limited ability to absorb price spikes.

For a typical Spanish manufacturer with annual energy costs of €500,000, a 146% increase in electricity prices would add more than €700,000 in annual costs — a figure that could wipe out profit margins entirely. Many SMEs are being forced to choose between passing costs to customers, cutting production, or absorbing losses.

The Alliance for the Competitiveness of Spanish Industry has urged authorities to maintain existing support measures and introduce stronger protections for production, investment, and jobs. Many current measures expire in the final months of 2026.

Will Energy Prices Fall Before the End of 2026?

The outlook depends heavily on the trajectory of the Iran war and the Strait of Hormuz. If shipping through the strait normalizes and oil prices retreat toward $80, energy costs could ease modestly in early 2027. But a return to pre-crisis prices appears unlikely in the near term.

UNESID has called for an emergency energy plan for 2026 that extends into 2027. The Spanish government has acknowledged the complexity of the current energy situation and indicated that new measures are being considered.

For businesses, the priority is resilience. Companies that can hedge energy costs, diversify suppliers, and invest in energy efficiency will be better positioned to survive the crisis. For investors, the energy shock is creating winners and losers: renewable energy providers and energy efficiency companies are benefiting, while energy-intensive manufacturers face margin pressure.

Frequently Asked Questions (FAQ)

Why are energy prices so high in Spain in 2026?

Energy prices have surged due to the Iran war and disruptions to shipping through the Strait of Hormuz, which carries about 20% of globally traded energy. Oil prices have risen above $100 a barrel, and gas prices have exceeded €80/MWh, pushing electricity prices to nearly €150/MWh.

How much has the Iran war added to Spanish industrial costs?

The Iran war could add nearly €7.4 billion ($8.5 billion) to Spanish manufacturers' costs through the end of 2026, according to the Alliance for the Competitiveness of Spanish Industry. Gas accounts for €4.2 billion and electricity for €3.2 billion.

Is the steel industry cutting production because of energy costs?

Yes. Spanish steelmakers have begun temporarily halting production during periods of peak electricity prices. UNESID estimates the sector faces €658 million in additional energy costs between March and December 2026, with €452 million expected in the September-December period alone.

How does this affect small businesses in Europe?

Small and medium-sized manufacturers are the most vulnerable because they often buy energy on spot markets and have limited hedging ability. A Spanish manufacturer with €500,000 in annual energy costs could face more than €700,000 in additional costs, potentially wiping out profit margins.

Will energy prices go down in 2027?

The outlook depends on the Iran war and the Strait of Hormuz. If shipping normalizes and oil retreats toward $80, energy costs could ease modestly in early 2027. However, a return to pre-crisis prices appears unlikely in the near term, and industry groups are calling for emergency measures extending into 2027.