Photo Alexix Bienvenu © LFDE
By Alexis Bienvenu, Portfolio Manager, La Financière de l’Échiquier (LFDE)
Gas prices in Europe are surging: at nearly €74 per MWh on 2 September[1], they are at their highest level since 2023, surpassing the peaks reached in the wake of the US-Iran conflict last spring. Admittedly, prices are still below the records seen in 2022 after the outbreak of the war in Ukraine, when they topped €300 per MWh. But they have been on an upward trend since the start of 2026, far above the assumptions used by certain institutions tasked with forecasting inflation, including the European Central Bank. This suggests that inflation ahead could prove stronger than expected — and, by extension, put upward pressure on rates.
The trend is all the more worrying because several factors are in place to prolong it. First, the Strait of Hormuz does not appear close to reopening on a lasting basis. Tensions between Iran and the United States only eased during a brief truce in June. Today, the situation appears deadlocked, with no visible progress in negotiations and no decisive military shift. Yet before the conflict, the strait accounted for around 20% of global liquefied natural gas (LNG) trade. True, some of the lost volumes have been offset by higher production in other parts of the world, but the International Energy Agency estimates that replacement rate at about 75%, leaving a significant supply shortfall on a market that has already been tight since the 2022 energy crisis.
Moreover, even if the strait were to reopen sustainably, Qatari output, which is crucial to the global LNG market, would remain constrained for several months at a minimum. Some key facilities are indeed out of service, notably the Ras Laffan complex in Qatar, the world’s largest natural gas liquefaction plant, and a return to normal operations will take longer than the time remaining before winter sets in.
Finally, these tensions come against a backdrop of European gas inventories well below their usual level at this time of year. According to Gas Infrastructure Europe (GIE), which centralises data from European storage operators, stocks were only about 65% full at the beginning of September, versus a historical average close to 88% at this point in the year. This is a substantial gap, one that points to a particularly strained supply picture this winter. The shortfall stems not only from the high prices seen in 2026, which reduced the economic incentive to build inventories, but also from supply difficulties linked to Asian competition for LNG and from an exceptionally hot summer, which boosted gas consumption for electricity generation to power air conditioning. Germany, in particular, is in a delicate position, with stocks barely above 50% full, even though its industrial base remains heavily dependent on gas.
To make matters worse, global weather patterns could intensify these pressures. The current El Niño event, unusually strong, tends to warm and dry out parts of Asia and the Pacific. These conditions increase the likelihood of higher Asian gas demand, driven by air-conditioning needs and potentially weaker-than-normal hydropower generation, and could therefore heighten global competition for available LNG cargoes.
Numerous factors are now aligning to produce a highly strained European gas market this winter, with a likely additional inflationary impulse and a decline in industrial output. Admittedly, these tensions will benefit certain sectors, such as nuclear power, renewables, electrification players and… American LNG producers. But they will hit other European sectors already under pressure, particularly chemicals, fertilisers and steel.
Beyond the inflationary risk, the issue is therefore also one of European competitiveness. While the United States enjoys a self-sufficient gas market, Europe remains heavily reliant on imported LNG. A lasting energy price gap between the two sides of the Atlantic will weigh on its industrial attractiveness.
Europe has, with great difficulty, managed to avoid energy shortages since 2022. But there is no guarantee that it will be able to counter its industrial decline in the medium term if gas remains abnormally expensive. Industry, in many ways, follows the flow of gas molecules. So, whatever the temperature, this winter is shaping up to be a hot one from an energy perspective: another test for Europe’s competitiveness.
Disclaimers: This information and these opinions are provided for information purposes only and therefore do not constitute an offer to buy or sell a security, investment advice or financial analysis. The opinions expressed are those of the author and in no way engage the responsibility of LFDE. Past performance is not indicative of future results.
[1] Dutch TTF Natural Gas futures contract, October 2026 maturity, source: Bloomberg
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