A critical energy crisis looms over Europe as the ongoing conflict with Iran disrupts gas supplies, leaving the continent scrambling to secure its energy needs for the upcoming winter. This situation has become increasingly dire, with gas storage levels at a five-year low, and the task of refilling these reserves now more challenging and costly than ever.
Europe's gas storage facilities, which are crucial for meeting winter heating and power demands, are set to end the heating season with significantly lower stocks than usual. This means Europe must procure additional gas during the summer months to replenish its storage across the continent.
The reliance on liquefied natural gas (LNG) to fill these storage facilities has grown exponentially since Europe halted most imports of Russian pipeline gas following the invasion of Ukraine in 2022. Prior to this, LNG accounted for about 19% of Europe's gas supply, but this year, it is expected to rise to 45%, equivalent to around 1,800 LNG tankers.
But here's where it gets controversial: the conflict with Iran has cut into these supplies, driving up prices and creating a scramble for alternative sources. Buyers in Europe are now faced with the task of finding the equivalent of around 700 cargoes of LNG, or 67 billion cubic meters, just to fill storage this summer. This is approximately 180 cargoes more than last year, and most of this supply will need to come in the form of LNG cargoes, not pipeline gas.
Prices for both pipeline gas and LNG have surged since the start of the Iran conflict. Benchmark gas prices in Europe have briefly hit their highest levels since early 2023, and are up nearly 50% this week. The global benchmark LNG contract, the Japan-Korea Marker, has also seen a significant increase of up to 68% as buyers rush to replace lost Qatari volumes.
Europe's bill for these additional 180 cargoes had increased to about $10.1 billion on Wednesday, up from $6.7 billion last Friday. For the full summer refill of 67 billion cubic meters, the price has risen by a staggering $13.6 billion to $40 billion.
European gas storage levels are expected to be around 22-27% full at the end of March, significantly lower than the five-year average of around 41%. If LNG supplies from the Middle East are disrupted further, storage levels could be even lower.
The shipping paralysis in the Strait of Hormuz, a critical waterway for global LNG trade, could have severe consequences for Europe's energy security. If this paralysis persists for one month, European inventories could fall to historic lows by the end of winter, resulting in significantly lower filling levels for the next season.
Approximately 120 billion cubic meters of LNG per year, or roughly 20% of global LNG supply, passes through the Strait of Hormuz. With four-fifths of these deliveries headed to Asia, Europe could face fierce competition for available cargoes, potentially losing out on around 5.5 million tons, or 7.6 billion cubic meters, of LNG.
This situation could push European gas prices above 60 euros per megawatt hour, compared to the current level of around 50 euros and 32 euros at the end of last week. A prolonged shutdown at Qatar's Ras Laffan LNG complex could lead to a supply squeeze similar to the 2022 energy crisis, with prices potentially reaching 100 euros/MWh or more, according to analysts.
Norway, Europe's biggest gas supplier, is already operating at maximum capacity. While the gas injected into storage this summer will be a mix of pipeline and LNG, the additional demand will primarily be met through LNG imports.
Higher prices may limit incentives to store gas, as expectations are that prices will eventually fall as the conflict resolves and more LNG supply becomes available. However, this situation highlights Europe's growing dependence on LNG, particularly from the United States, which is the top supplier of LNG to Europe and the region's second-largest gas supplier overall.
While the United States has encouraged the European Union to buy more of its LNG, it may not be able to increase output quickly enough to compensate for the lost Qatari volumes. Qatar accounted for 3.5% of the EU's gas supply in 2025, while the U.S. share stood at 25.4%.
The International Energy Agency forecasts that global LNG supply will grow by more than 7%, or 42 billion cubic meters, in 2026, with the largest additions coming from the United States. However, the current conflict and its impact on supply chains and prices highlight the vulnerabilities of Europe's energy security and the need for a diversified and resilient energy strategy.
As Europe navigates this complex energy landscape, the question arises: How can the continent ensure a stable and affordable energy future in the face of geopolitical tensions and supply disruptions? Share your thoughts and insights in the comments below!
