Is Europe’s gas market inching towards a winter crisis?

Hopes that the war in the Middle East might end, allowing energy exports through the Strait of Hormuz to resume, were lifted by the signing of the Memorandum of Understanding (MoU) between the US and Iran on 12 June. Optimism, though, may prove short-lived, as military strikes by both sides ratchet back up. Shipping through the Strait has largely ground to a halt again.

Gas prices are proving more sensitive than Brent. European spot prices are currently trading above €60/MWh (US$20/mmbtu), reaching heights last seen at the start of the conflict as winter ended, and more than 50% higher than at the signing of the MoU.

Ahead of the global gas industry meeting in Bangkok for Gastech 2026 in September, I asked Massimo Di-Odoardo, Head of Gas & LNG Research, why gas prices are proving so sensitive to the latest disruption, why Europe is particularly vulnerable and whether market developments could reshape expectations of global LNG oversupply in the years ahead.

Why are gas prices rising fast? Besides the resumption of hostilities in the Middle East and the impact on shipping transiting the Strait of Hormuz, three structural dynamics are amplifying the upward pressure on gas prices.

First

European gas storage is only just above 50% full, an historically low level at this time of the year, raising concerns over how much gas Europe will be able to secure ahead of the 2026/27 winter heating demand season.

Second

Asian demand has rebounded since April and is now back at 2025 levels, despite the shortfall of Qatari volumes and firm prices. Competition with Europe for marginal cargoes is intensifying, pushing prices up and exacerbating the European storage risk.

Third

There are limited additional volumes of LNG supply coming to market over the next 9 to 12 months, with new Qatari developments now only expected to start up in the second half of 2027.

How does the Strait of Hormuz play into this?

Even assuming a best-case scenario with Qatar re-starting production and reaching full operational capacity by the end of September (excluding its two damaged trains), we estimate that European storage will only reach 75% capacity at best by 1 November. That’s well below the 90% average of the past five years ahead of winter. As flows resume through the Strait, we would expect prices to drop initially. However, low storage inventories almost guarantee elevated prices through this winter and into 2027.

Further delays to the re-opening of the Strait of Hormuz will pile on more pressure. European storage levels would struggle to reach even 70% capacity were closure to be extended by another two months. Europe competing with Asia for limited cargoes throughout the winter would drive prices higher still. Wealthier countries in Europe and Asia will be able to buy their way through the winter, but some emerging Asian economies will inevitably face demand destruction as LNG becomes increasingly unaffordable.

What can Europe do next?

This isn’t 2022 all over again – at least not yet. European gas prices are nowhere near the heights following Russia’s invasion of Ukraine and the loss of Russian pipeline supply. In addition, the implications for European power markets are now less severe, given the policy response since 2022 and the huge levels of investment in renewables capacity since.

Nevertheless, Europe is approaching energy crisis territory. The war in the Gulf has encouraged EU officials once again to ramp up the rhetoric on reducing dependence on imported fossil fuels. As part of this, the EU last week launched its hugely ambitious Electrification Action Plan aimed at almost doubling electrification by 2040 and reducing gas demand by 65% to 70% in the same period.

But crises – and governments’ responses to them – tend to be defined by their immediate impact. Europe has set long-term goals, but the reality is that there are limited alternatives to gas today, meaning urgent action is needed to reduce market risks.

If the coming winter situation becomes critical, the EU might well be forced to rethink two of its key energy policy goals that could constrain imports: rolling out more stringent methane emission regulations and banning all Russian LNG imports from January 2027.

Are we still heading into an over-supplied market?

The resilience of LNG supply is poised to be tested to the limits over the next 6 to 12 months. But with over 250 Mtpa of new LNG supply under construction, an over-supplied LNG market from 2028 remains the most likely outcome.

A return to relative global geopolitical stability will help to deliver this. If the Strait of Hormuz remains disrupted or new risks emerge, however, both the duration and depth of LNG over-supply could prove less significant.

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