A tale of two energy crises – initial conditions matter in World Economy News 08/06/2026 The current energy shock is significant and global, but it is also hitting a euro area economy that is more balanced than when Russia invaded Ukraine in early 2022. History and analysis show that context matters a lot for how shocks propagate to inflation. Energy prices have risen sharply since early 2026 when war broke out again in the Middle East and the Strait of Hormuz was closed. This big uptick in energy inflation has in turn driven up headline inflation in the euro area, to stand at 3.2% in May. This blog post takes a close look at two dimensions that are relevant for the propagation of an energy shock: (i) the nature and composition of the shock itself, and (ii) the state of the economy and the broader macro-financial condition at the outset. This shock is different The current energy shock differs in nature and composition from the episode that followed Russia’s invasion of Ukraine in February 2022. Unlike in 2022, the Middle East war has sparked more disruption in the supply of oil, rather than of natural gas, to the euro area. Indeed, the upsurge in crude oil prices has been faster and pressure on prices of some refined oil products, like diesel, has been larger in the latest episode than in 2022, while wholesale gas and electricity prices rose much more in 2022 (Chart 1). The difference in the reaction of gas and electricity prices for the most part reflects how Europe was more directly exposed to the shock in 2022 and was less prepared. Moreover, some structural changes in the euro area energy mix since 2022 also imply that the direct sensitivity of consumer prices to a given wholesale energy price shock has declined. The clearest example of this is the increasing cushioning role of electricity generated from renewable sources. While wholesale electricity prices tracked gas prices closely during the 2021-22 energy crisis, their reaction since the start of the war in