​European gas prices had receded after the March rally that drove them to €60/MWh. But as of early August, the Strait of Hormuz is still not fully open, and there is no sign of a solution to the US-Iran conflict any time soon. In July, prices rallied again: delivered prices across Europe increased by 42% since 1 July.

Europe is entering the second half of the summer with ongoing supply problems and burning about 20% more gas for power generation than a year earlier, during ongoing heatwave conditions. Storage fill levels are at 59%, the lowest level for this point in the year in over 15 years. With an effective 80% storage fill level target before the winter and limited willingness from governments to intervene, the second half of the summer will continue to be tight. For batteries and renewable assets, higher gas prices tend to boost revenues. But the timing matters - do prices spike in summer or in winter?

Key takeaways

• The gas market is tight: gas prices have rallied up to €60/MWh again in July, based on expectations of a slower resolve to the US-Iran war closing the Strait of Hormuz. Norwegian outages at the Ormen Lange field sent prices up a further 10% on 10 August.
• This risk now has a timing issue: filling storage before the winter could make the second half of the summer tight. Lowering the storage target and leaving storage less full leaves the winter vulnerable for disruptions and price spikes.
• EU storage was 59% full on 8 August, the lowest for the date in over 15 years and even narrowly below 2021 (60%), the year Gazprom left its German sites empty.
• The gas shortage is physical: the Hormuz crisis has resulted in 36 TWh (17%) less gas being physically available for injection. LNG send-out this summer fell 68 TWh (25%) year-on-year, while demand rose 6 TWh (1.6%) from higher power-sector gas burn because of heatwaves.

European gas prices have increased 42% through July, indicating how tight the market is to react to additional shocks

European gas prices had receded to €40/MWh after their March rally, driven by continued news cycles around reopening the Strait of Hormuz. But in July, prices again increased by 42% over one month: renewed fighting in Iran, with increasingly hostile statements from both sides and no sign that the Strait will open soon, has sent gas prices back above €60/MWh.

A sharp move on 10 August illustrates how tight the market is: an outage at Norway's Ormen Lange field worth about 100 GWh/d was extended to 1 February, and prices increased almost 10% to €60.80/MWh. In some years, an outage like this would have barely moved the needle. But this means that Europe has to source another 11 LNG cargoes until February. In the current market, securing additional cargoes requires offering higher prices than Asian buyers to attract vessels in a potential tug-of-war.

The gas price forward curve shows relief in 2027, with the near-term the highest point of the curve

The market does not believe the tightness will last forever - but the supply disruptions will impact Europe at least until the end of the coming winter. The forward curve still slopes downwards over the next four years, despite the rally pushing up the front. A wave of new US liquefaction capacity is already being built out, outweighing any lingering Hormuz worries. Calendar year 2028 trades near €30/MWh, roughly half the front.