Analysts Warn European Gas Market Is Underpricing a Prolonged Hormuz Crisis

Analysts Warn European Gas Market Is Underpricing a Prolonged Hormuz Crisis ICE Endex TTF front-month could reach EUR 100/MWh if the strait stays shut, with Asian demand and EU restocking set to compete for shrinking LNG supply. The European gas market is underestimating the impact that the Middle East war could have on longer-term supply, with a price rise to EUR 100/MWh over the coming months a genuine possibility, analysts told Montel. The warning came as ICE Endex Dutch TTF gas front-month traded well below that level, suggesting the forward curve has not fully absorbed the scenario of a prolonged Hormuz closure.⁴ Europe is underestimating the risk of extended disruption, with rising Asian gas demand coinciding with EU storage replenishment efforts likely to create a supply squeeze that drives prices higher, market participants told Montel. The combination is dangerous: both regions need more LNG at a time when one of the world's largest supply corridors is effectively shut.⁵ Around 25% of Europe's total gas supply is LNG, according to Chris Wheaton, oil and gas analyst at Stifel. That dependency makes the continent acutely sensitive to any sustained reduction in seaborne gas flows, particularly from Qatar, whose exports through Hormuz remain under force majeure.⁶ A prolonged surge in gas prices risks denting European economic growth and hitting some Asian economies hard, CNBC reported. Global gas prices have soared amid fears of a lengthy disruption to energy flows through the strait. The macroeconomic consequences extend well beyond the energy sector: higher gas costs feed into industrial input prices, power generation costs, and ultimately consumer inflation across importing nations.⁶ Some of the near-term pressure has been tempered by demand destruction in Asian countries, according to Seb Kennedy, an independent energy analyst at Energy Flux. Asian buyers have pulled back from spot purchases, drawing down inventories rather than paying war-premium prices. But that demand has been deferred, not destroyed. A return to active buying would tighten the global LNG balance sharply.⁵ The U.S. gas market tells a different story. NYMEX Henry Hub gas front-month June settled at $2.96 per million British thermal units, gaining 2.3% on the day and about 7.4% for the week, supported by expectations of hotter weather, stronger power-sector demand and resilient LNG exports. Weekly LNG vessel departures from U.S. terminals reached 141 billion cubic feet, up 26 Bcf from the prior week despite maintenance activity at several export facilities.^2,3 U.S. inventories remain comfortable. Working gas in storage fell by 52 Bcf for the reporting week, well below the five-year average withdrawal of 168 Bcf. Inventories are 141 Bcf higher than a year ago, about 8% above last year's level. The surplus provides a buffer, but it is a U.S.-specific cushion that does nothing for European balances.¹ The disconnect between U.S. and European gas fundamentals highlights the structural bottleneck. U.S. export capacity is running near maximum. Even with record LNG vessel departures, the volumes cannot fully replace the Qatari and other Middle Eastern LNG that normally flows through Hormuz. Europe is bidding against Asia for a fixed pool of non-Hormuz supply, and the price has not yet reflected how tight that competition could become if the crisis extends through winter. EU storage refill season is underway, and every cubic metre injected now at current prices is a bet that winter supply will be available at comparable or lower cost. If the Hormuz closure persists into the fourth quarter and Asian buyers return to active procurement, that bet could look expensive in hindsight. The signal to watch is whether ICE Endex Dutch TTF gas front-month begins to price the tail risk of a winter without restored Hormuz flows. At current levels, the market is pricing resolution. Analysts are pricing extension. One of them is wrong.