Goldman Sachs has indicated that European natural gas prices might need to exceed €100 per megawatt-hour (MWh) this winter under a scenario where the Strait of Hormuz remains legally and physically closed through August. This would entirely remove the assumption of LNG normalization by the end of July and compress the gas injection window to just three months. Currently, Goldman's base case for H2 2026 is €41/MWh, but a prolonged disruption in the Middle East could trigger this significant price increase.
The investment bank previously noted in March that European gas could jump 130% if shipping through the Strait of Hormuz was halted for just one month. The strait, which usually handles a fifth of the world's liquefied natural gas (LNG) flows, primarily from Qatar, has been constrained by the Middle East conflict, leading to low European storage levels. As of August 10, European gas storage was only 59% full, the lowest seasonal level since 2009.
The Oxford Institute for Energy Studies (OIES), another research body, offers a more conservative but still high-price outlook, suggesting that prices might need to reach above €60/MWh (approximately $20/MMBtu) to redirect Asian cargoes to Europe and fill storage to 70% by November. This divergence stems from Goldman's expectation of a quicker recovery of Qatari exports by late July, while OIES projects a two-month delay into September due to insurance hurdles and mine-sweeping efforts in the strait. This two-month difference is critical as it covers the peak summer filling season, potentially leaving European tanks significantly behind on inventory.
The significant gap between Goldman's €41/MWh base case and the OIES's €60+ forecast highlights the uncertainty in the market. The €17/MWh difference in views on the Q4 2026 TTF futures represents approximately €5,000 per lot of exposure, with open interest exceeding 180,000 lots by mid-June, valuing the resolution of this disagreement at around €900 million. European gas prices have already surged more than 130% since the start of 2026, with Dutch TTF futures reaching over €65/MWh in August, driven by summer heatwaves increasing electricity demand and low storage levels.
Europe's reliance on gas reserves is substantial, covering about 30% of its winter needs and over 50% on the coldest days. With inventories historically low and supply-side risks materializing, the region faces the challenge of building sufficient stocks before winter without resorting to extreme price hikes. The lack of incentive for traders to store fuel, partly due to summer prices occasionally exceeding winter contract prices, further complicates the situation, raising concerns about the cost of heating and power for households and industries.
