Europe may face a new energy crisis. And here's why
The European Union risks facing a new energy crisis due to rising gas prices and tensions in the Middle East. Since the end of February, the cost of gas in Europe has increased by 53%, reaching a maximum since 2023. The reason for the price spike and what will happen next is in the Izvestia article.
Record numbers
• Gas prices in Europe have jumped sharply and reached their highest level since January 2023. At the TTF hub in the Netherlands, April deliveries on March 3 cost €65.5 per MWh, an increase of almost 48%, and by mid—afternoon - €59.48 per MWh. Since the end of February, the cost of gas has increased by about 90%, which was the largest jump since the crisis of 2022.
• Due to the ongoing missile attacks on all the countries of the Persian Gulf, including Qatar, where the largest liquefied natural gas (LNG) plant has closed. These developments threaten the supply of gas and LNG to Europe. In addition, the attacks lead to disruptions in the supply of pipeline gas from Iran and LNG from Qatar, the United Arab Emirates and Oman, which can create serious problems.
• Prices have not yet reached a record in 2022, but summer futures are already higher than winter ones, so gas storage has become less profitable for traders. Because of this, Goldman Sachs analysts raised the forecast for the cost of gas in Europe for April 2026 from €36 to €55 per MWh. The main reason is the tension in the Middle East and the risk of supply disruptions.
• There is an indirect effect of attacks on Iran. Asian countries, which usually buy LNG from the Middle East, have started looking for gas from other suppliers. As a result, they are competing for the same fuel shipments that Europe was counting on.
• Electricity prices have also risen in Japan due to problems with LNG supplies from the Persian Gulf. Electricity contracts for Tokyo for 2026 rose to 16.38 yen per kWh, while short—term supplies in April increased by 33% to 17.02 yen. Trading on the Japanese futures markets set a record of 4.9 TWh. Japan depends on LNG imports for about 30%, so the government is looking for alternative sources in case of disruptions.
Deterioration of relations with Russia
• Russia redirected gas supplies to more profitable markets in advance, without waiting for a complete ban from the EU. The decision to reorient gas exports is not related to politics, but to economics: companies are looking for higher-priced markets. Russia will continue to supply only those partners that demonstrate reliability, including Eastern European countries such as Slovakia and Hungary.
• The European Commission discussed the security of gas and oil supplies to the EU and stated that at the moment there are no direct threats, but with prolonged disruptions the situation may change. The EU is likely to postpone the ban on short-term contracts for Russian LNG until April 25, 2026, and long-term restrictions may be postponed to January 1, 2027. Moscow decided to act ahead of schedule, realizing that the withdrawal of Russian gas from the European market would be a serious blow to the region's economy.
• The conflict in Iran has increased the rise in oil prices and tanker freight. Joint strikes by the United States and Israel on facilities in Iran, as well as retaliatory attacks by Tehran, affected ships in the Persian Gulf, which led to a record increase in tanker rental rates to $480,000 per day. In addition, due to these events, Russian oil has become more attractive on international markets, and discounts on Urals have decreased to 25-30% of the value of Brent.
Why are prices rising?
• Gas prices for Europe are rising faster than oil prices due to a combination of several factors. In the EU, reserves in underground storage facilities are at a very low level — about 30%, which increases the risk of physical shortage. The situation was aggravated by interruptions in LNG supplies from Qatar after the attacks in the Persian Gulf.
• Additional pressure is created by competition for free LNG shipments: Asian buyers are actively outbidding spot volumes that used to go to Europe, which pushes prices up.
• Unlike oil, the gas market is more fragmented and has fewer opportunities for storage and rapid redirection of supplies. Therefore, any supply disruptions cause a sharper price reaction.
• The risks associated with Iran have already been partially taken into account in oil quotes, so oil prices are rising more modestly. Possible disruptions in LNG supplies from the region came as a surprise to the gas market.
• In addition, the gas market has rarely faced crises in the Persian Gulf. Problems in the energy sector were more often related to pipeline supplies, while the countries of the region were considered reliable LNG exporters. Gas also has fewer reserves and supply flexibility: LNG storage facilities in the EU cover only about 12 days of imports, and there is almost no spare capacity for gas production and transportation. Therefore, the market reacts to such events much more strongly.
Who will suffer and who will earn
• The Middle East ranks third in terms of LNG supplies to Europe. However, it may take Qatar weeks or even months to restore regular supplies of liquefied natural gas after an Iranian drone strike on the largest LNG plant in the industrial city of Ras Laffan. After the attack, the country declared force majeure on supplies. Qatar's offshore production facilities have not been affected, but the risk of new attacks remains.
• If supply disruptions from the Persian Gulf last for several weeks, prices may rise to $1,000-1,500 per thousand cubic meters. Competition with Asia creates additional pressure.: Countries such as Japan and South Korea are willing to pay more for LNG and can pull free volumes from the European market.
• The main beneficiaries may be the United States, which is able to increase LNG exports and capitalize on high prices. Russia may also partially benefit.: The crisis is intensifying discussions in Europe about the possible return of Russian gas. However, the ability to quickly increase supplies is limited by sanctions, the shortage of ice gas carriers and the full loading of existing projects.
Europe's prospects
Qatar and the UAE play an important role in global gas trade, accounting for about a fifth of the global LNG market. After the Iranian attacks, the Qatari company QatarEnergy temporarily halted production. In addition, exports have been complicated by the situation in the Strait of Hormuz, a key route for oil and gas supplies from the region. Due to security threats, many major shipping companies have suspended the passage of tankers through this route.
• If supplies across the strait are disrupted for about a month, prices in Europe may remain around €32-37 per MWh on average per year. With a longer crisis, the cost may rise to about €38. The most negative option — a complete shutdown of supplies for three months — can raise the price to about €46 per MWh on average per year.
• An additional risk is associated with a possible reduction in supplies from Russia. In 2025, the EU bought about 38 billion cubic meters of gas from Moscow, about 12% of its imports. If these volumes disappear simultaneously with disruptions in the Middle East, the situation will become more complicated.
• Also, due to the conflict in the Middle East, the Persian Gulf countries may stop oil and gas production. In this case, oil prices may rise to $150 per barrel, and gas prices may rise almost four times. Many exporters in the region may declare force majeure in the coming days. At the same time, even if the fighting ends quickly, in particular, Qatar will need several weeks or months to restore LNG supplies after an attack by Iranian drones on a large plant.
Переведено сервисом «Яндекс Переводчик»
