Gas alert

• Alexis Bienvenu
  Fund Manager
  La Financière de l’Échiquier (LFDE)

Admittedly, prices have not reached the record highs seen in 2022 following the outbreak of the war in Ukraine, when they stood at over 300 euros per MWh. However, they have been on an upward trend since the start of 2026, far exceeding the assumptions on which certain institutions responsible for forecasting inflation – notably the European Central Bank – had based their projections. This suggests that future inflation could be higher than anticipated – and consequently, so too could the pressure on interest rates.

This trend is all the more worrying as several factors are converging to prolong it. Firstly, the Strait of Hormuz does not appear set to reopen on a lasting basis. Tensions between Iran and the United States eased only during a brief truce in June. Today, the situation appears deadlocked, with no discernible progress in negotiations nor any decisive military developments. Yet, prior to the conflict, the Strait accounted for around 20 per cent of global trade in liquefied natural gas (LNG). Admittedly, some of the lost volumes have been offset by increased production in other parts of the world. However, the International Energy Agency estimates this replacement rate at around 75 per cent, leaving a significant supply shortfall in a market that has already been under strain since the 2022 energy crisis.

Furthermore, even if the strait were to reopen permanently, Qatari production – which is essential to the global LNG market – would remain hampered for several months at the very least. Certain crucial facilities are indeed out of operation, in particular the Ras Laffan complex in Qatar, the world’s largest natural gas liquefaction plant. A return to normal industrial operations would take too long to be compatible with the deadline posed by the coming winter.

Finally, these tensions are occurring against a backdrop where European gas reserves are significantly below their usual level for this time of year. According to Gas Infrastructure Europe (GIE), which collates data from European storage operators, stocks were only around 65 per cent full at the start of September, compared with a historical average of close to 88 per cent at this time of year. This is a considerable shortfall, which points to a particularly tight supply situation this winter. This shortfall stems not only from the high prices seen in 2026, which reduced the economic incentive to build up reserves, but also from supply difficulties linked to competition from Asia for LNG and a particularly hot summer, which increased gas consumption for electricity generation to power air conditioning. Germany, in particular, finds itself in a precarious position, with stocks barely above 50 per cent, whilst its industrial sector remains heavily dependent on gas.

To make matters worse, global weather patterns could exacerbate these pressures. The very powerful El Niño event currently underway is causing certain regions of Asia and the Pacific to become warmer and drier. These conditions increase the likelihood of a rise in Asian demand for g , due to air-conditioning needs and potentially lower-than-normal hydroelectric generation. They could therefore intensify global competition for available LNG cargoes.

A number of factors are therefore currently aligning to create a very tight European gas market this winter, likely leading to higher inflation and a decline in industrial production. Admittedly, these pressures will benefit certain sectors, such as nuclear power, renewables, electrification players and… US LNG producers. But they will penalise other European sectors already in a precarious position, particularly the chemicals, fertiliser and steel industries.

Beyond the risk of inflation, the issue therefore also concerns European competitiveness. Whilst the United States benefits from a self-sufficient gas market, Europe remains heavily dependent on imported LNG. A sustained energy price differential between the two sides of the Atlantic will weigh on its industrial attractiveness.

With great difficulty, Europe has managed to avoid an energy shortage since 2022. But there is no guarantee that it will be able to combat its industrial decline in the medium term if gas remains abnormally expensive. This is because factories tend to relocate in tandem with gas supplies. Thus, whatever the temperatures may be, the winter is set to be a ‘hot’ one from an energy perspective: a new test for European competitiveness.

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