Middle East Conflict Drives Up European Gas Prices, Forecasting €60/MWh

Goldman Sachs has significantly increased its forecast for European natural gas prices due to the ongoing conflict in the Middle East. The US investment bank now expects the Dutch Title Transfer Facility (TTF) gas price to average €60 per megawatt-hour in the third quarter of this year, up from its previous forecast of €41/MWh.

The increase is attributed to the prolonged disruption to liquefied natural gas (LNG) flows through the Strait of Hormuz. The Strait is a crucial maritime corridor for global LNG exports, with approximately 20% of global LNG passing through it.

Goldman Sachs also raised its forecast for the fourth quarter from €40 to €53/MWh and increased its projection for 2027 from €30 to €31/MWh. However, the bank's forecast for 2027 appears relatively modest compared to the sharp upward revisions for the third and fourth quarters.

The consequences of gas disruptions could be particularly severe for Europe, which has reduced its dependence on pipeline gas from Russia but increased its reliance on global LNG markets. A disruption in the Gulf can increase European gas prices even when the physical disruption does not occur directly on European territory.