Europe Scrambles for Pipeline Gas as Analysts Discount Bab el-Mandeb LNG Threat
Spain's Medgaz deal with Algeria signals alternative supply-seeking even as analysts say the Red Sea chokepoint adds little incremental LNG risk to a market already priced for Hormuz.
Spain and Algeria reached an agreement on Friday (2026-07-24) to raise natural gas flows through the Medgaz pipeline to 12 billion cubic metres per year, with expanded LNG deliveries also planned, as Madrid seeks to reinforce energy security amid U.S. trade threats and soaring LNG prices, oilprice.com reported. The deal followed reporting published Tuesday (2026-07-21) by Montel, in which analysts found a Houthi blockade of the Bab el-Mandeb Strait unlikely to significantly disrupt LNG supply to Europe.4,1
The measured position on Bab el-Mandeb rests on a specific logistical point. Most LNG tankers have already rerouted away from the Red Sea strait, and the Middle Eastern production most exposed to disruption there is locked behind the separate closure of the Strait of Hormuz, Montel reported. The blockade adds a marginal shipping constraint to a supply shock that has already repriced the market.1
Bab el-Mandeb normally handles roughly 7% of global oil output, while the Strait of Hormuz carried about 20% of world oil and gas before the Iran conflict started, oilprice.com reported. Asia receives close to 90% of LNG shipments from Qatar and the UAE; Europe draws just 7-11% of its LNG from the Middle East, limited exposure in ordinary times but material when storage buffers are thin.2
Those buffers are thin. European gas storage stood below 54% of capacity, against 64% at the same point in 2025, according to oilprice.com's Wednesday (2026-07-22) report. ICE TTF front-month settled at €63.76/MWh at Friday's close (2026-07-24), up 3% on the session.2
Iranian attacks during spring 2026, not Bab el-Mandeb shipping constraints, delivered the more direct hit to European LNG supply. Strikes on Ras Laffan LNG Trains 4 and 6, and Pearl GTL Train 2 forced QatarEnergy to estimate that repairs would sideline roughly 12.8 million tonnes per year of capacity for an unspecified period, oilprice.com reported. Qatar and the UAE together supply the bulk of the Middle Eastern LNG cargoes that Europe and Asia compete for on the spot market.2
Higher trading activity has partly absorbed the uncertainty. LNG derivatives trading jumped 251% year-on-year as buyers and sellers managed exposure across a fractured supply picture, S&P Global Platts reported. But trading redistributes risk; it does not create supply.2
ICIS analysts warned that Europe's gas supplies face pressure this winter, with the conflict delaying the expected recovery of Qatari LNG exports during the summer storage-filling season, Montel reported. A storage rebuild stalled at 54% heading into autumn leaves utilities with limited cushion if winter demand runs above seasonal norms, and the ICE TTF front-month faces a higher floor entering heating season in that scenario.2
Rystad Energy, in an update published Thursday (2026-07-24), assigned a 20% probability to its most severe scenario — sustained dual-waterway closure in which "the deficit overwhelms market buffers." Negotiations collapse in that case, Rystad said. The firm noted that some Yanbu crude can be moved north via the Suez Canal and SUMED pipeline, but warned that this is not a full replacement; fully laden very large crude carriers cannot transit Suez.3
Coordinated SPR releases would become likely under Rystad's worst case, the firm projected, but cautioned that usable stocks are constrained by location, crude quality, and refinery compatibility. "Previous SPR releases have already drawn down global stocks, in some cases to minimum levels," Rystad said, raising the price sensitivity of any fresh escalation.3
With storage running 10 percentage points below last year's seasonal levels, European gas traders are watching Qatari repair timelines, not Houthi movements in the Red Sea.2