Middle East Tensions Threaten Europe's Gas Supply in 2027

European natural gas prices are forecast to be vulnerable to significant increases by 2027. Analysts from Citi suggest that escalating Middle East conflict could pose a substantial risk to liquefied natural gas (LNG) infrastructure. If conflict intensifies but liquefaction facilities remain intact, benchmark Dutch TTF winter 2026-27 prices could reach €85 per megawatt-hour.

However, the situation could worsen considerably if LNG facilities are directly impacted and taken offline. In such a scenario, prices might surge to approximately €154/MWh. Citi's weighted estimate for an escalation scenario stands at about €103/MWh, a notable increase from the prevailing price of around €95/MWh.

Longer-dated European gas contracts, including calendar 2028 TTF, have seen a substantial rally of about 60% over the past three months. This unusual price movement brings them close to levels not seen since the Russia-Ukraine war in 2022, potentially reflecting market concerns about prolonged LNG facility damage.

In contrast, Citi sees greater risk-adjusted upside in U.S. benchmark Henry Hub gas prices. This outlook is particularly relevant if severe cold weather or a polar vortex materializes. Speculative positioning for Henry Hub prices is currently at some of the shortest levels observed since early 2020.