European natural gas prices have surged sharply in recent weeks amid concerns over winter supply amid ongoing disruptions in the Strait of Hormuz and heat-driven demand spikes. The Dutch TTF benchmark contract climbed to over €62 per megawatt hour yesterday, representing a nearly 50 percent increase since late June and approaching levels last seen during the early stages of the conflict between the United States and Iran. Prices in the United Kingdom showed a similar trend, reaching 151.29 pence per therm. By comparison, Brent crude oil prices have risen more modestly, increasing around 20 percent to just above $93 per barrel over the same period.
Analysts attribute the recent price rally to a tightening global gas market, as Europe faces heightened electricity demand due to persistent heatwaves driving air conditioning usage. Furthermore, reduced output from parts of France’s nuclear fleet has increased dependence on gas-fired power plants during a critical period for energy supply. Christoph Halser, a gas analyst at consultancy Rystad, noted that the market is now more sensitive to the diminished flow of vessels through the Strait of Hormuz amid escalating tensions in the US-Iran conflict, with winter approaching in the Northern Hemisphere.
Europe’s efforts to secure sufficient gas supplies are compounded by competition from Asia, where peak summer temperatures have also elevated demand for gas-generated electricity. Recent weeks have seen several liquefied natural gas (LNG) cargoes diverted from Europe to Asian markets offering higher prices. Although European prices are increasing, Halser pointed out they have not yet reached levels that would attract LNG shipments back from Asia.
The price surge is challenging efforts to replenish European gas storage ahead of the winter season. Germany, for example, aims to fill storage to 70 percent capacity by early November but currently stands at only 45 percent, according to industry data from Argus. Equinor, Europe’s largest gas supplier, flagged the risk that storage targets may not be met, leaving the continent exposed to sharp price volatility as colder weather arrives. Torgrim Reitan, Equinor’s chief financial officer, described the situation as "vulnerable" and expressed uncertainty about entering the winter months.
The International Energy Agency issued a warning that continued delays in resuming exports from the Gulf could prolong tight market conditions. Rystad’s baseline forecast anticipates the Strait of Hormuz will reopen before the final quarter, enabling key LNG exporters such as Qatar to restore full production levels. Should the waterway remain closed longer, Europe’s ability to reach adequate storage levels may be compromised.
Halser also noted that while high storage remains important, its criticality has diminished relative to previous years, as Europe has reduced annual gas consumption by approximately 20 percent since Russia’s full-scale invasion of Ukraine, and increased its LNG import capacity through new terminals capable of regasification. Nonetheless, the convergence of geopolitical tensions, weather-driven demand, and infrastructure limitations continues to place significant pressure on European gas markets as the winter heating season approaches.