New modeling from energy analysis firm ICIS shows that a three-month disruption would send European benchmark gas prices sharply higher and put pressure on storage levels heading into winter.
Nuclear talks between the US and Iran will continue this week after previous meetings failed to achieve a breakthrough.
The US has now done just that strengthened his military posture in the Gulf region, deploying an aircraft carrier strike group to the North Arabian Sea. Iranian Revolutionary Guard forces have carried out exercises in the Strait of Hormuz and tested a temporary blockade of the sea passage, with officials publicly raising the possibility of closing the route to international traffic.
Oil markets have already begun to respond to rising geopolitical risk.
Prices rose to their highest level in seven months as traders prepared for renewed nuclear talks between the US and Iran. US crude futures rose to $67.28 a barrel this week, while Brent crude hit $72.50, its highest level since July 31, 2025, before easing later in the session.
The disruption scenario points to a sharp market shock
The ICIS believes that the strategic importance of the strait is difficult to overestimate. A prolonged shutdown would disrupt a quarter of global seaborne oil flows and a fifth of LNG trade. For Europe, the most immediate impact would be the loss of Qatari LNG volumes passing through the Gulf.
To assess the potential impact, ICIS modeled two scenarios: a baseline scenario reflecting current market conditions, and a disruption scenario assuming no contracted Qatari LNG imports to Europe until the end of May: a 102-day shutdown combined with a 131 terawatt-hour (TWh) reduction in spot LNG volumes over 90 days.
In the disruption scenario, the Dutch TTF front-month contract, which is the European gas benchmark, would rise to 92 euros per megawatt hour, averaging around 86 euros/MWh during the 90-day blockade.
This price point hovers significantly above the base case and easily exceeds the price response in ICIS’s cold winter scenario, resulting in an increase of around 20 percent in some Eastern European markets.
Moreover, a three-month interruption of LNG from Qatar would represent a supply shock of roughly 14 percent over that period, before taking into account missing spot cargoes.
According to ICIS, this scale of disruption would likely push the European gas balance into a deficit area.
“We see that Europe has simultaneously allowed strategic buffers such as gas storage levels to erode to dangerously low levels at a critical time in global affairs,” said ICIS editor Ghassan Zumot.
Even with high prices, not all demand in Central and Eastern Europe could easily be met while still meeting the imposed EU storage targets. In the disruption scenario, storage levels drop to approximately 244 TWh at the end of winter, compared to 275 TWh in the base scenario.
Under such circumstances, the ICIS noted that competition between Asia and Europe for flexible LNG cargoes would also increase.
Its modeling suggests that the marginal price during the blockade would be determined by the relative willingness to pay of Asian energy systems during the summer cooling season versus Europe’s need to secure LNG for storage injections before winter.
Volatile market meets wave risk
The prospect of disruption in the Gulf is creating new uncertainty in energy markets that have yet to stabilize.
“A chart of Brent crude oil prices this year could serve as a tapestry to understand the key market events this year,” Matthew Cunningham, economist and editor at FocusEconomics, told Investing News Network (INN).
“Throughout the year, prices have continued the downward trend they started in April (2024), as OPEC+ continued to increase production and the Chinese economy continued to struggle under the weight of a faltering real estate sector, low consumer confidence, over-indebted local governments and weakening external demand,” he added.
US President Donald Trump’s on-again, off-again tariffs also created uncertainty in the markets. “We can see that Trump’s ‘Liberation Day’ tariffs have pushed prices to levels they have not yet recovered from, barring a spike in June due to the 12-day war between Iran and Israel,” Cunningham said.
Despite the current perception of abundant oil supply with floating inventories hovering around a billion barrels, analysts warn that geopolitical disruptions could quickly change the balance.
“The real question is not whether oil and gas production will increase, but by how much,” Cunningham said, noting that production forecasts have been revised upward in response to OPEC+ production increases and strong U.S. LNG demand. At the same time, tensions within OPEC+ and sanctions against Russia could complicate supply paths.
For Europe, the direct vulnerability lies in gas. The continent has made significant progress since 2022 in diversifying supply routes and expanding LNG import infrastructure.
However, a closure of the Strait of Hormuz would immediately test these gains.
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Securities Disclosure: I, Giann Liguid, have no direct investment interest in any company mentioned in this article.
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