Spain, Portugal, and part of southern France were affected by a massive blackout, network operators said, affecting millions of people.
The cause of the outage has not been reported.
Spanish rail operator Adif said the power outage had halted trains across the country, while airport operator Aena said there had been "several incidents" at Spanish airports.
Mobile phone networks were also down. AFP reporters in Madrid and Barcelona saw many residents taking to the streets, holding their smartphones to try to connect to the network.
Many people had to use the radio instead of the inaccessible internet to get news about the situation.
Many traffic lights were not working, forcing cars to slow down to avoid collisions, and the metro and trains were stopped. The Spanish national road authority, DGT, urged drivers to stop using the roads.
Spanish Prime Minister Pedro Sánchez is on his way to the headquarters of the state-owned electricity grid operator Red Electrica to be briefed on the emergency, his office said.
Portuguese operator REN said the entire Iberian Peninsula was affected by the power outage, as well as part of France. It added that the outage occurred at 11:33 a.m. local time.
Spanish operator Red Electrica said it had managed to start restoring power in the north and south of the country, but the problem had not yet been resolved.
"We are continuing to work to restore power," the company said.
The Spanish newspaper El País published photos on its website of stopped metro trains in Madrid, police directing traffic, and its own reporters working in a darkened office by the light of flashlights. | BGNES