Europe faces a winter energy crunch: How Middle East conflict is squeezing gas buffers

The pressure comes as the war involving Iran disrupts energy supplies and raises uncertainty over shipments from the Middle East. Europe’s benchmark gas prices reached 3½-year highs on Tuesday, Reuters reported. Disruption to Qatar’s supplies has pushed the market into backwardation, a situation in which near-term gas prices are higher than prices for later delivery.

That creates a problem for European buyers. When gas for immediate delivery costs more than gas for winter delivery, there is less financial incentive to buy and store gas now. Europe therefore faces a difficult calculation over how much gas it can secure before colder weather arrives.

The latest pressure comes after Europe has already spent heavily to protect its energy supplies. The European Commission said on July 13 that the European Union had spent around €53 billion more on fossil-fuel imports since the beginning of the Middle East conflict in February.

The Commission said gas prices remained above pre-conflict levels in July, although they were still well below the levels seen during the 2022 energy crisis following Russia’s invasion of Ukraine.

Europe is therefore not facing a repeat of the 2022 crisis, at least for now. But it still needs to enter winter with sufficient gas in storage, and higher prices are making that task more expensive.

Why are Europe’s gas reserves under pressure?

Gas storage plays a central role in Europe’s winter energy system. The European Commission says underground storage normally provides around 25% to 30% of the gas consumed in the EU during winter.

That stored gas reduces the need for additional imports during periods of high demand and helps the bloc absorb sudden supply shocks. As a result, the amount of gas in storage before winter is a key indicator of Europe’s energy security.

The EU has rules requiring gas storage facilities to reach a target of 90% each year. Under the rules for 2025-27, countries have a two-month window, from October 1 to December 1, to meet the target. Governments can also deviate from the target when market conditions or technical constraints make it difficult to fill storage at the normal pace.

Until recently, the European Commission had said the bloc was on track. On May 28, the Commission said it had no immediate concerns about gas security for the 2026-27 winter. It expected storage levels to reach 80% by the end of summer, which it considered sufficient to secure supplies for the winter.

The Energy Union Task Force reviewed storage levels and winter preparations on July 10. It also concluded that there was no immediate security-of-supply concern and that storage-filling targets remained achievable.

Europe also has spare capacity to import liquefied natural gas, or LNG, providing another source of flexibility if pipeline supplies become more difficult.

But market conditions have since deteriorated. Reuters reported that benchmark European gas prices had risen to their highest level in about three and a half years, with disruption to Qatar’s supplies caused by the Iran war adding pressure to the market.

That creates a direct problem for storage. If buyers face high prices for gas delivered now while winter gas is cheaper, they have less incentive to purchase and store supplies. Yet winter demand could rise sharply if temperatures fall.

The backwardation in the market therefore creates uncertainty over how quickly Europe will replenish its reserves. This does not mean the EU has run out of gas or faces an immediate physical shortage.

The latest official assessment cited in the sources, from July 13, said there was no immediate supply concern. The Commission also said that LNG import capacity is a source of additional flexibility.

Europe has more protection than it did in 2022

The EU is better prepared for an energy shock than it was before the 2022 crisis. The first major buffer is LNG. The Commission said in July that the bloc has substantial spare LNG import capacity, allowing European countries to bring in gas from other parts of the world if pipeline supplies become more difficult.

The second is coordination. The EU has used mechanisms including the Gas Coordination Group and Oil Coordination Group to monitor the impact of the Middle East conflict and assess risks to energy supplies.

These safeguards were strengthened after the 2021-22 energy shock, when low storage levels and Russia’s invasion of Ukraine contributed to a period of exceptionally high energy prices.

The EU extended its gas-storage rules in 2025. The current framework runs through the end of 2027 and gives governments greater flexibility when market conditions make it difficult to fill storage at the normal pace.

The Commission’s storage data show how important this seasonal buffer has become. EU gas storage reached 83% on October 1, 2025, with around 85 billion cubic metres of gas in stock. That represented roughly 25% of annual EU gas consumption, according to the Commission.

The problem for 2026 is that Europe must refill those reserves while the global energy market is facing another geopolitical shock.

The energy shock is spreading into Europe’s economy

The impact is no longer confined to the gas market. Euro zone inflation had risen above 3% on Tuesday, Reuters reported. New European Central Bank research found that the increase in inflation since the beginning of the Iran war had been driven almost entirely by higher energy prices.

ECB researchers told Reuters that the rise in headline inflation through the end of May 2026 had been driven “almost entirely by adverse energy supply shocks”. That creates a difficult choice for the European Central Bank.

Higher energy prices can push inflation higher, potentially requiring tighter monetary policy. But higher interest rates can also put pressure on economic growth at a time when euro zone growth remains weak.

The ECB had already raised rates in June, its first increase in nearly three years. Markets were expecting another increase in September, with investors pricing in a possible rise in the deposit rate to 2.50% on September 10, Reuters reported.

The energy problem therefore extends beyond household gas bills. Higher gas and oil prices can increase costs for businesses, feed into consumer inflation and influence central-bank decisions. For governments, they can also increase pressure to support households and energy-intensive industries.

Europe is spending more on energy while trying to reduce dependence on fossil fuels

The European Commission said the EU had spent about €53 billion more on fossil-fuel imports since February because of the conflict. At the same time, Brussels wants to reduce its dependence on imported fossil fuels.

The Commission said in July that its strategy of moving away from fossil fuels towards cleaner, domestic and more affordable energy remained a priority. It also said it would publish an Electrification Action Plan and a proposal aimed at making electricity bills more resilient.

The EU has also begun work on revising its Oil Stocks Directive, with the Commission saying the review would incorporate lessons from the current Middle East crisis. This means Europe’s immediate energy-security response and its longer-term energy transition are moving in parallel.

In the short term, the bloc needs reliable gas supplies. In the longer term, it wants to reduce its exposure to imported fossil fuels.

Can Europe avoid another energy crisis?

Europe is better prepared for an energy shock than it was in 2022. EU rules require member states to maintain gas-storage levels ahead of winter, while the European Commission has pointed to spare liquefied natural gas (LNG) import capacity as an additional source of flexibility.

The bloc also has mechanisms to coordinate its response if energy markets deteriorate. The European Commission said on July 13 that it would continue monitoring oil and gas markets and coordinate action with member states if required.

These measures provide a buffer, but they do not eliminate the economic consequences of a prolonged energy shock.

The impact is already being felt through inflation. Euro zone inflation had risen above 3%, Reuters reported. Separate research by the European Central Bank found that the recent increase in inflation was driven almost entirely by higher energy prices linked to adverse energy supply shocks.

That creates a difficult environment for the ECB. Higher energy prices can push inflation higher even as they weaken economic activity by increasing costs for households and businesses. The central bank therefore has to assess whether an energy-driven inflation increase is temporary or likely to become more persistent.

ECB policymakers had already warned about inflation risks linked to the Iran conflict and rising energy prices, Reuters reported in July.

For Europe, the challenge is therefore no longer limited to securing enough gas for winter. A prolonged disruption could keep energy prices elevated, add to inflation and increase pressure on businesses and households at a time when economic growth remains weak.