Europe Faces New Gas Crisis

Written by Martin Lynch, European News Editor for IIR News Intelligence (Sugar Land, Texas)

Summary

Europe is facing a new gas crisis as prices soar due to major shipping disruptions in supply caused by the U.S./Israel war with Iran.

Soaring oil and gas prices have raised fears that Europe could be facing a gas crisis on a scale not seen since 2022, when Russia invaded Ukraine. 

The latest Middle East crisis, sparked by U.S. and Israeli bombing of Iran and its subsequent attacks on neighbouring countries and production facilities, has seen a huge disruption of oil and gas deliveries to Europe and Asia. Europe's gas storage levels have also fallen to below 30%, thanks largely to a harsh winter period in January. For additional information, see January, 2025, article - European Gas Prices Surge 45% on Iran Conflict.

Gas Prices Could More Than Double

Goldman Sachs has warned that European natural gas prices could more than double if shipments through the Strait of Hormuz are halted for one month. It stated: "There is significant risk that European gas and global LNG prices could climb higher, according to Goldman Sachs Research. The most critical impact to global gas markets would come from a disruption of the approximately 80 million tons per annum of LNG (19% of global LNG supply) that typically flow through the Strait of Hormuz. In a scenario where LNG flows through the Strait of Hormuz are fully halted for one month, Goldman Sachs Research estimates that Dutch natural gas, or TTF, could approach 74 euro per megawatt-hour (EUR/MWh). A hypothetical longer disruption of natural gas supply transit through the Strait of Hormuz lasting more than two months would likely lift European natural gas prices to more than 100 EUR/MWh. TTF natural gas traded at about 31.6 EUR/MWh on Friday."

Iran Picks New 'Hardline' Leader

Iran's rulers have chosen Mojtaba Khamenei to succeed his father, Ali Khamenei, as Iran's supreme leader. Ali Khamenei was killed on February 28 at the outset of the Iran war. The selection of Mojtaba Khamenei shows that the ruling hardliners are still in charge and will resist the uprising and regime change called for by both Israel and the U.S. "With the appointment of the late leader's son as Iran's new leader, U.S. President Donald Trump's goal of regime change in Iran has become more difficult," said Satoru Yoshida, a commodity analyst with Rakuten Securities. "That view accelerated buying, as Iran is expected to continue its closure of the Strait of Hormuz and attacks on other oil-producing nations' facilities, as seen last week." He predicted that WTI could rise to $120 and then $130 a barrel in a relatively short period.

Oil Prices Also Up

At the start of this week, oil prices were up more than 15% at levels not seen since mid-2022, with major producers cutting supplies and growing fears of prolonged shipping disruptions in the narrow Strait of Hormuz that runs along Iran's coast, linking the Persian Gulf to open seas. Iran has fired on shipping and threatened to continue its attacks on traffic and production facilities in neighboring countries. This has led to many of the largest shipping insurance firms pulling their cover on vessels in the region. Brent crude futures were up over $15 at $108 per barrel on Monday, heading towards the biggest-ever jump in a single day, while U.S. West Texas Intermediate (WTI) crude futures were up more than $14 at $105. Last week, Brent climbed 27% and WTI by 35.6%. 

Middle East Cutting Production

The United Arab Emirates (UAE) and Kuwait are the latest nations in the region to start cutting oil production. They are following similar moves by Iraq, while Saudi Arabia has shut its biggest refinery and Qatar closed the world's largest liquefied natural gas export plant, Ras Laffan, after drone attacks.

Europe's Response

Right now, governments in EU Member States are under fierce pressure from citizens as the price of home heating oil and diesel have spiked greatly in the past week. The Eurogroup of finance ministers from EU Member States are currently meeting to tackle the looming energy crisis. President of the Eurogroup and Greek Economy and Finance Minister Kyriakos Pierrakakis told Euronews that Europe is "being tested."

"Energy is going to be a core element of our discussion," he said. "The impact on energy prices is significant already and we want to see how we are going to meet that challenge on the ground," claiming Europe is prepared. "We already have a toolkit, the 2022 toolkit. We are not there yet but businesses and households are already signalling they need support as prices deepen."

Key Takeaways

• Europe facing a new gas crisis as U.S./Israel/Iran war continues.
• Oil and gas prices headed for new record highs.
• Disruptions to oil and gas shipments through the vital Strait of Hormuz are crippled, driving up prices and reducing supplies globally.

IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resource's Global Market Intelligence (GMI).

About Industrial Info Resources

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).