Europe Faces New Energy Crisis as Gas Prices Surge Above €80/MWh

The European energy market is facing another challenging winter as gas prices surge above 80 euros per megawatt hour, a level not seen since late 2022. This increase in price comes despite efforts by governments to diversify supplies and reduce dependence on Russian imports.

However, the new challenge now lies with the Strait of Ormuz, a critical shipping route through which major volumes of energy flow from the Gulf region to world markets. The tension around this route is increasing due to the ongoing negotiations between Washington and Tehran, which has led to a rise in volatility even when mediators seek a diplomatic outcome.

Europe's increased dependence on liquefied natural gas (LNG) means that it is now more exposed to global market disruptions. A lasting disturbance at Ormuz would have an impact far exceeding the volumes directly destined for Europe, as Asian buyers would also look for alternatives and the cargo available elsewhere would become more expensive.

European states are expected to compete with major importers like China, Japan, and South Korea for the same molecules. The crisis around Ormuz perfectly illustrates this changeover in dependence from a single supplier to a broader set of risks, including LNG availability, strait operation, liquefaction capabilities, Asian competition, port infrastructure, and weather conditions.

European energy security can have indirect consequences for other regions, particularly fragile economies and importing countries outside Europe. The increase above 80 euros per megawatt hour indicates that the contract attributes a much higher value to risk, which is then transmitted in a differentiated manner. Households with fixed-price contracts may be temporarily protected, but new contracts gradually integrate market conditions.

The rise of gas prices comes at a particularly delicate time for industry, as energy-intensive sectors have already had to adapt to rising costs since 2022. The gap between European and global prices could become a problem of competitiveness for companies that use gas either as a source of energy or directly as a raw material.