After the bombings on the Ras Laffan and Mesaieed plants, Qatar suspends the production of liquefied gas and European prices soar above 40 euros/MWh. Between blocked Hormuz, competition with Asia and the end of Russian gas, the continent is once again exposed to geopolitical shocks. And the risk of a new energy crisis is already reflected in the future bills of families and businesses.
Europe suddenly discovers that the war in the Middle East is no longer just an abstract threat to gas routes, but an open wound on global supply. In the space of a few hours, while missiles fly over the Persian Gulf, Qatar – one of the pillars of the world LNG market – announces a stop to production after the bombings on the Ras Laffan and Mesaieed plants, and methane prices in Europe shoot up as they have not happened since 2022. It is no longer just the fear that the methane tankers will be targeted in the Strait of Hormuz: it is the main liquefied gas “factory” on the planet that stops, leaving the European energy system hanging on storage tanks and the hope that the winter will end quickly.
The heart of the risk is once again geographical. The Persian Gulf is not just a giant oil tank: it is also an essential hub for liquefied natural gas, the LNG that today powers European power plants and compensates for the collapse of Russian pipeline flows. Qatar, Iran’s neighbor, is among the world’s top exporters of LNG, and around a fifth of global liquefied gas exports pass through Hormuz, the narrow stretch of sea between Iran and Oman that connects the Gulf to the Indian Ocean. In the last few hours, following drone attacks against the Ras Laffan and Mesaieed plants, the state company QatarEnergy announced the suspension of the production of liquefied natural gas and associated products: a stop which adds to the de facto blockade of methane tanker traffic in the Strait and which amplifies the alarm on global markets, which have already exploded with increases of up to over 50% on European wholesale prices. LNG tankers destined to load in Qatar or the Emirates are starting to deviate from course, and the risk is that a significant part of the world’s LNG supply will remain out of play until the safety of terminals and routes is re-established.
Technically, Europe today only imports a limited share of its LNG directly from the Gulf, with the United States, Norway, Algeria and – again – Russia dominating the supplier map. But in a globalized market, it’s not just who sells to whom that matters: it matters how much gas is at stake overall and at what price. More than 80% of Qatar’s LNG is absorbed by Asia, particularly China and India, but if those volumes are cut or even questioned, large Asian buyers flock to the same spot cargoes that Europe relies on, driving prices even higher. It is the same mechanism seen in 2022: fewer molecules available, more competition to get them, rally in prices in Europe.
The signal coming from the markets is very clear. Already in the previous weeks, tensions with Tehran and the cold had brought the TTF back above 30 euros/MWh, after months of apparent calm around 25 euros. Then, with the cross-raids and the worsening of the military confrontation involving Iran, the United States and Israel, the flare-up: opening the week, European futures soared above 40 euros/MWh, with an intraday progression of more than 20-25% and a surge in “optionality” paid by operators to insure themselves against further shocks. The announcement of the stop in Qatar did the rest, pushing prices to levels that many analysts consider compatible with a real “second wave” of the gas crisis, if the situation were to continue.
On the structural front, the picture is ambivalent. On the one hand, in response to the 2022 crisis, the Union has cut gas consumption by around a fifth, filled storage to record levels and equipped itself with new regasification capacity, particularly in Germany and Italy. According to the most recent data from the Commission, in the third quarter of 2024 European storages were 88% full and gas represented a decreasing share of the electricity generation mix compared to previous years, thanks to renewables, nuclear and hydroelectric. Overall, gas demand in Europe in 2024 was still decreasing compared to 2023, confirming a structural adjustment linked to efficiency, savings and new technologies.
On the other hand, this is not enough to transform Europe into an island. The end of Russian gas transit through Ukraine at the end of 2024, the minimized agreements with Gazprom and the growing international competition for LNG have made the continent more exposed to swings in spot markets. A significant part of combined cycle power plants remains indispensable to guarantee the daily balance of the electricity grid: even if the share of gas in generation has fallen compared to peaks, fossil fuel often continues to dictate the marginal price of energy, i.e. the level at which wholesale tariffs are formed. In practice, when gas power plants come into operation to cover the residual demand not covered by renewables, the cost of methane is transferred directly to the electricity bill.
The link between war and bills passes right through here. Every gas price shock reverberates with a few weeks or months’ delay on the accounts of families and businesses, depending on the type of contract (indexed or fixed price) and government intervention. The first effect, visible already in the next few months if tensions do not subside, will be an increase in variable offers, both for direct gas (heating, cooking) and for electricity, especially in countries where gas-fired thermoelectric production remains dominant. In parallel, the energy-intensive industry – from chemicals to steel – will see supply costs increase, with a possible domino effect on the final prices of goods, i.e. on a return “energy” inflation.
The political response is not obvious. In the two-year period 2022-2023, the EU and national governments have made hundreds of billions available to cut system costs, control prices and support businesses with tax credits and subsidized tariffs. Today the fiscal space is much narrower, with higher public debts and a Commission oriented towards returning from the season of extraordinary aid; it is far from certain that a new wave of subsidies can be replicated on the same scale. Yet, the social impact of yet another energy crisis – even if only at a reduced intensity compared to 2022 – risks being politically explosive, in a Europe that is approaching important national elections and is already experiencing widespread discontent over the cost of living.
The game, in the end, is played on two parallel levels. In the short term, everything depends on the evolution of the conflict in the Middle East: if the Strait of Hormuz remains open and the threat to methane tankers diminishes, gas prices could retreat from their peaks, although remaining higher than in recent months due to the embedded risk premium. If, however, the crisis were to become chronic or worsen, with direct attacks on infrastructure or implicit embargoes, the race for LNG would once again become a race to the top between Europe and Asia, bringing scenarios previously considered exceptional to the foreground.
In the medium term, Europe’s only real insurance remains to accelerate the transition already underway: more renewables, more storage, more flexibility in consumption, less dependence on imported fossil fuels. But the news of recent days, with European gas soaring by more than a fifth in a single session and, above all, the suspension of production in Qatar which temporarily resets one of the lungs of the world market, is a brutal reminder of how long the road still remains. The suspension of production in Qatar, combined with the de facto blockade of LNG tanker traffic in the Strait, is not a passing incident but yet another reminder that the transition away from imported fossil fuels is proceeding too slowly compared to the speed with which geopolitics can overturn markets. As long as the heart of the energy system is located in regions affected by wars and retaliations and as long as gas power plants remain the decisive prop for keeping Europe’s electricity grids switched on, every new war front in the Gulf will risk resulting, with a few weeks’ delay, in a new upward line on the bills of citizens and businesses.
