European Gas Prices Face Pressure from Middle East Conflict and Asian Demand

The ongoing conflict in the Middle East and Asia's increasing demand for liquefied natural gas (LNG) are putting pressure on European gas prices. According to Goldman Sachs analysts, benchmark gas prices in Europe need to rise above €100 a megawatt-hour (MWh) in December 2026 for countries to rebuild enough inventory to last the winter.

The recent increase in futures prices on the TTF exchange in Amsterdam will not be enough to redirect sufficient quantities of LNG from Asia to Europe, especially if supply disruptions in the Middle East continue into next year. The Strait of Hormuz, a critical shipping route, has seen reduced shipments due to the war between the US and Iran.

European gas storage facilities are normally refilled during the summer months, but this year's process is behind schedule. At current rates, gas storage in northwestern Europe will end in August at 51%, which is 3.4 percentage points below Goldman's baseline scenario.

A 'super' El Niño weather pattern could help offset low inventories by reducing gas demand, according to a report from Rystad Energy. However, analysts at Goldman Sachs believe that prices will not be enough for Europe to manage storage through winter without a significant price increase.