The war in the Middle East has triggered a seismic shift in European energy markets, lifting oil and gas stocks while leaving renewables lagging. Stoxx 600 energy sector index gained 6% since the conflict erupted, as investors bet on companies benefiting from elevated refining margins and product prices. Repsol SA, a Spanish oil and gas firm, stands out as a top pick, with analysts noting its refineries face damage that could keep prices high post-conflict. Equinor ASA and Galp Energia also saw double-digit gains, benefiting from minimal Middle East exposure. Yet the sector shows internal fractures: infrastructure firms like TotalEnergies SE, heavily exposed to Qatar's shut LNG facility, trade flat against the broader index. Renewables face headwinds too, with Neste Oyj gaining 28% on demand for cleaner fuels but Vestas Wind Systems and Nordex SE lagging amid inflation and borrowing cost pressures.

Higher energy prices could delay renewable project execution, as geopolitical risks overshadow long-term benefits. While Siemens Energy AG trades at subgroup lows, analysts warn Middle East operations could face contract cancellations. The crisis underscores Europe's fossil fuel dependence, though long-term renewable interest persists despite short-term volatility.