European natural gas futures have not yet matched the record highs seen during the 2022 energy crisis, when prices briefly spiked to 300 euros per megawatt-hour. However, prices have surged over 150% since the start of the year, driven by escalating geopolitical tensions in the Middle East. The US-Iran conflict has disrupted liquefied natural gas (LNG) shipments through the Strait of Hormuz, which previously handled about one-fifth of global LNG supplies. Although shipments have partially recovered since late September, they remain at roughly one-quarter of pre-conflict levels.
European natural gas storage inventories are significantly below historical norms for this time of year, standing at about 73%, compared to the five-year average of 89%. The European Commission stated on October 8 that current reserves, while below averages, should meet winter demand under baseline scenarios. However, industry analysts caution that depressed storage levels leave Europe vulnerable to supply shocks, particularly in the event of a severe winter or import bottlenecks.
Carole Nakhle, Chief Executive Officer of Crystol Energy, noted that the concentration of LNG exports in a few countries means even small disruptions could have major repercussions on global trade. Rising wholesale gas prices will not immediately impact all households, but more consumers will face price pressures next year as existing contracts expire. German price comparison portal Verivox reports that natural gas offers for new customers have climbed 55% year to date.
Surging gas prices are also forcing European power producers to reconsider generation economics. Data from energy research firm ICIS shows that coal-fired power generation has become more cost-effective than gas-fired generation for the first time since at least 2024. Analysts project European coal-fired generation could expand by about one-quarter over the next six months to offset declines in gas-fired output. Sara Vakhshouri, Founder and President of SVB Energy International, emphasized that Europe's primary concern is prices, not supplies, and that repairing infrastructure and returning to previous production levels could take years.