Europe’s vulnerability to the gas market has changed in recent years. Whilst its reliance on imports has remained stable, its gas supply has been more vulnerable to global market conditions since 2022, due to a shift in the composition of its imports. Furthermore, in 2026, the combination of high geopolitical risk in one of the main production regions and the pressure of climate change on European consumers has created an unprecedented situation, leading to price pressures and significant uncertainty regarding the short-term outlook. Even if they ease, tensions in the European gas market could persist beyond the winter, largely due to the need to refill inventories.
Whilst Europe is not heavily reliant on gas imports from the Middle East, it has had to contend with a fresh surge in prices since the outbreak of war in Iran last February, a rise that has, in part, been passed on to electricity prices this summer. Furthermore, new sources of vulnerability, particularly those linked to climate change, are at play. These call for caution regarding the short-term outlook for the European gas market.
Europe’s growing exposure to market volatility
Unlike the 2022 energy crisis, which hit Europe directly, the war in Iran is indirectly affecting the European gas market. 80% of gas exports from the Middle East are destined for Asia. However, the growing interconnection between the two main gas-importing regions — Asia and Europe — has resulted in the crisis spreading to Europe. Since 2022, the transmission of shocks to liquefied natural gas (LNG) benchmark prices on the European and Asian markets (TTF and JKM) has increased significantly, in both directions[1].
Despite a fall of around 20% in European gas consumption since 2022, the replacement of around 60% of Russian pipeline imports with purchases of liquefied natural gas (see Chart 1) has kept Europe’s vulnerability at a high level. Given developments in the LNG market — growing interconnection between European and Asian markets and the importance of spot contracts (around one-third of European supply contracts[2]) — Europe finds itself, through no fault of its own, increasingly exposed to gas price volatility.
Rising European exposure to LNG marketChart 1 Source: Bruegel, BNP Paribas
Furthermore, the increasing autonomy and flexibility of the global LNG market may exacerbate this volatility. The higher proportion of LNG sales contracts with flexible destinations[3] (rising from 29% to 51% of the total between 2016 and 2025), linked to the massive influx of US LNG onto the market, together with the reduction in the share of contracts indexed to oil prices (from 70% to 55% over the same period), have made price formation on the LNG market more autonomous, thereby increasing the opportunities for arbitrage and the flexibility of this market.
Major disruptions in the LNG market have constrained the refilling of European inventories
The 85% reduction in LNG exports from Qatar and the UAE in Q2 and Q3 2026 was offset by two-thirds through, on the one hand, an increase in exports from other producing countries (primarily the United States) and, on the other hand, a fall in demand in Asia and Europe (which is forecast to reach, respectively, 1.5% and 3% year-on-year in 2026, according to IEA forecasts[4]). Owing to the damage caused by the war to infrastructure (17% of Qatar’s production capacity is out of service) and logistical constraints specific to the LNG market (unavailability of LNG carriers), the LNG market has benefited only marginally from the resumption of flows through the Strait of Hormuz since July. Against this backdrop of tensions in the gas market, high prices in Europe (up by around 174% since the outbreak of the conflict) have significantly slowed the refilling of European stocks. They stood at 75% of full capacity at the end of October, whilst the official target is 80% (see Chart 2).
Europe begins winter with historically low gas stocksChart 2 Source: AGSI, BNP Paribas
Over the winter, divergent factors could stabilise prices at a high level
Gas stock levels that are below the target set by the European Commission do not increase the risk of a shortage on the European continent. Nevertheless, Europe’s vulnerability towards the end of winter, in the event of a cold snap, would force it to buy on the market at high prices. Furthermore, from a technical perspective, exposure to the consequences of a cold snap at the end of winter is all the more pronounced as the rate at which gas can be withdrawn from storage (the ease with which a country can access its supplies) decreases (due to lower stock levels in storage facilities).
Apart from stock levels at the start of winter, three factors will determine the situation at the end of the season, a key period of vulnerability:
1/ the resumption of exports from the Gulf, a region that is essential for restoring market balance in the short term;
2/ weather conditions during the winter;
3/ renewable energy production.
According to the IEA, in the worst-case scenario (with exports from the Middle East only resuming from the end of the first quarter of 2027, a cold winter and low renewable energy production), stocks would stand at 7% of total capacity by the end of winter, compared with 33% in the best-case scenario. Such levels remain significantly below the average for the last five years at this time of year: 80% in the worst-case scenario and 18% in the best-case scenario. This would underpin restocking demand over the next two quarters, and therefore keep prices at a fairly high level. For the time being, a significant recovery in LNG exports from the Gulf remains highly uncertain, even though indirect talks between the warring parties have resumed. On a more positive note, the current development of a very powerful El Niño event should, in principle, be associated with relatively mild temperatures during the winter in western Europe. According to the futures markets, European gas prices are not expected to return to their pre-crisis levels until 2028 (see Chart 3).
Markets expect prices to return to pre-crisis level starting from 2028Chart 3 Source: Bloomberg, BNP Paribas
Are we heading for a summer peak in gas demand?
In addition to these factors, which are likely to prolong market tensions during the first half of 2027, the summer period could also be characterised by increased demand for gas. During the summer of 2026, weather conditions hampered the generation of certain forms of renewable energy (heatwaves and droughts restricting electricity generation from hydroelectric[5] and wind power sources). They also disrupted nuclear power generation (in France, nuclear electricity generation fell by around 10% year-on-year between August and October[6]). Alongside these constraints on carbon-free electricity generation, heatwaves are driving up demand for electricity, particularly for air conditioning. Against this backdrop, as a source of flexibility within the electricity mix, gas remains a key determinant of electricity prices in Europe[7]. In Q3 2026, whilst the decline in European gas consumption mainly affected industry, the residential sector and the commercial sector[8], consumption by gas-fired power stations was 9% higher than in 2025.
Strengthening European programmes
In this context, and despite the progress made in decarbonising the European electricity mix, high gas prices have led to a rise in wholesale electricity prices in most European countries. Between July and September 2026, these prices were on average 54% higher than in the same period a year earlier.
Against this backdrop of widespread rises in energy prices, European governments have primarily introduced measures to support households’ purchasing power when buying fuel. Measures relating to gas supply remain fairly limited. The European Commission has extended the target for refilling European stocks to 80% (instead of 90%) for 2026. It has also urged Member States to extend the stock-refill season in order to smooth out purchase prices. Furthermore, the measures taken in 2022 under the RePower EU programme have been maintained: reducing dependence on Russian gas with the aim of a complete phase-out (pipeline and LNG) by the end of 2027; and pooling gas purchases at European level. The ‘decarbonisation and electrification’ component of this programme was strengthened in April 2026 by the Accelerate EU programme, notably through measures to accelerate the electrification of demand and the development of electricity grid infrastructure at European level.
At national level, it is worth highlighting the price cap mechanism for gas purchased by power stations, which the Italian government is set to introduce. In 2025, gas set the price of electricity in Italy in 73% of cases (compared with an average of 40% across Europe). This price cap mechanism, similar to that introduced in Spain in 2022, is, in principle, only sustainable in the short term. Indeed, its cost is likely to be significant given the Italian electricity mix’s high dependence on gas.
Increased market dependence and the consequences of rising climate risk for European electricity generation are altering the vulnerabilities associated with the continent’s gas market. The sources of risk are increasing in number and becoming harder to manage. This calls for the continuation and strengthening of decarbonisation efforts in the European policies launched in 2022.
