BERLIN — Germany’s government signed a major liquefied natural gas deal with Canada on Friday as the Iran-Middle East war threatens to disrupt fossil fuel supplies and drive energy prices higher across Europe, adding fresh strain to an already fragile eurozone economy still grappling with the ECB’s latest rate cut.
The agreement, signed in Berlin, will see Canada supply LNG to Germany’s Uniper and other utilities over a 10-year term, according to a statement from Germany’s Economy Ministry. The deal is part of Germany’s broader push to reduce dependence on any single supplier after cutting Russian gas imports following the 2022 Ukraine invasion.
The timing is urgent. Oil reserves across Europe are declining as countries release strategic stockpiles to offset supply disruptions caused by the widening conflict in the Middle East, according to an International Energy Agency assessment published this week. Brent crude has surged past $104 per barrel as the US-Iran standoff has disrupted tanker traffic through the Strait of Hormuz — the conduit for roughly one-fifth of the world’s oil.
The ECB cut its benchmark rate to 2.5 percent last week, its lowest level in more than two years, as the eurozone faces mounting headwinds. The bank forecast growth of just 0.9 percent for 2025 and 1.2 percent for 2026 — projections now under threat from energy cost pressures that could reignite inflation just as monetary policy is being loosened.
ECB President Christine Lagarde warned that “an escalation in trade tensions would lower euro area growth by dampening exports and weakening the global economy,” while acknowledging the bank faces “risks, uncertainty all over” on multiple fronts. Germany’s coalition parties have separately advanced plans for a €500 billion infrastructure and defense stimulus package, which could further complicate the ECB’s effort to keep inflation in check.
European governments are under pressure to balance energy security, inflation control, and fiscal restraint simultaneously. With heating season months away, officials in Berlin and Brussels are watching oil market movements closely. Any sustained disruption to Hormuz traffic could push European gas prices sharply higher and set back the eurozone’s fragile recovery just as the ECB begins cutting rates to stimulate growth.