The Cost of Instability in Iran: How the Gulf Crisis Costs Europe €14 Billion a Month

Much of the international attention has centred on succession politics and the possibility of instability at the top of Iran's political system. Yet the more consequential shift is occurring below the level of formal power. Institutions remain in place, ministries continue to function and the state has not ceased to exist. What has weakened is something less tangible but equally important: the government's ability to dictate behaviour in public spaces.

For years, ideological control relied on constant enforcement. Dress codes, gender segregation and public conduct were monitored so routinely that many restrictions became part of everyday life. That system depended on an uninterrupted security presence.

The regional conflict changed those priorities.

As security agencies redirected personnel and resources toward external threats and the uncertain leadership transition, everyday policing became less consistent. The gap was quickly filled - not by organised political parties or opposition leaders, but by ordinary citizens testing limits that suddenly appeared less rigid.

That distinction deserves attention. Political protests can be dispersed. Elections can be controlled. Opposition organisations can be dismantled. A society that gradually changes its habits presents a different challenge. Once people become accustomed to behaving differently in public, reversing those habits requires far more than restoring legal penalties.

Across urban Iran, actions that once carried significant personal risk have become increasingly commonplace. Women appear in public without compulsory veils. Mixed social gatherings take place more openly. Cultural life occupies streets and cafés with a confidence rarely seen in previous years. These are not isolated acts of defiance. They indicate that social behaviour is adjusting faster than the authorities can restore previous patterns of enforcement.

The importance of that change lies in its decentralised nature. There is no single organisation directing it, no leadership structure to dismantle and no obvious headquarters to close. The transformation spreads through imitation. One neighbourhood normalises a new behaviour, another follows, and gradually practices once viewed as exceptional become ordinary.

That process began well before the current crisis. The protests that followed the death of Mahsa Amini in 2022 had already reshaped public attitudes. Although the movement failed to produce immediate political change, it altered expectations among a younger generation that became increasingly unwilling to accept ideological restrictions as permanent.

The assassination of Khamenei did not create those attitudes. It created the conditions in which they could move from protest into daily life.

European media have generally described the situation with careful restraint, arguing that the Iranian regime appears weaker without necessarily standing on the edge of collapse. That is a sensible assessment if the focus remains on state institutions. It says less about what is happening within society itself.

Governments do not lose influence only when they are overthrown. They also lose influence when people quietly stop organising their lives according to official rules. Such changes rarely produce dramatic headlines, but they often prove harder to reverse than moments of open confrontation.

While this internal shift gathers momentum, Europe is already paying the external cost.

The renewed instability surrounding Iran has pushed energy prices higher and revived concerns over one of the world's most important maritime corridors. Even the prospect of disruption around the Strait of Hormuz has been enough to increase costs across supply chains, affecting fuel prices, freight and industrial production throughout Europe.

The economic impact has been immediate. European economies have absorbed an estimated €14 billion in additional monthly energy import costs, while forecasts point to a 0.6% reduction in eurozone GDP if elevated prices persist. For manufacturers already dealing with weak demand and tight margins, another rise in energy costs comes at an especially difficult moment. Households face renewed pressure from inflation just as many expected price growth to ease.

The episode also reinforces a lesson European policymakers have been learning since Russia's invasion of Ukraine: energy security cannot be separated from foreign policy. Diversification is no longer discussed primarily as an environmental objective. It has become an issue of economic resilience.

That explains the growing interest in liquefied natural gas infrastructure, nuclear generation and faster deployment of renewable energy. Each investment is intended to reduce exposure to crises that originate far beyond Europe's borders but quickly affect domestic economies.

Not everyone loses under these conditions. Higher oil and gas prices strengthen Russia's export revenues, softening the impact of Western sanctions. LNG exporters benefit from stronger European demand, while investors direct fresh capital toward alternative energy infrastructure viewed as less vulnerable to geopolitical shocks.

Iran's leadership faces a different problem altogether.

Replacing a supreme leader, however politically difficult, is an institutional task. Rebuilding ideological authority is something else entirely. Even if the state restores tighter security measures in the months ahead, it may discover that public expectations have already shifted. Rules that once depended on automatic compliance become far more expensive to enforce once large numbers of people stop treating them as legitimate.

That may prove to be the lasting consequence of the current crisis. Political authority can survive military confrontation. Administrative systems can adapt to new leadership. But once society begins reclaiming everyday public life on its own terms, the balance between state power and social consent rarely returns to its previous form.