In a matter of weeks, the Iran conflict has rewritten Europe’s energy calculus.
The benchmark Dutch TTF natural gas price has jumped from €38 per megawatt-hour to €54 month-to-date — a 70% increase that puts March 2026 on course to be the strongest monthly increase for European gas prices since September 2021.
It is a number that carries weight far beyond energy markets.
Europe’s gas vulnerability is not evenly distributed
Europe entered this crisis already in a fragile position.
Underground gas storage stood at just 28.4%, or 325 terawatt-hours, as of 24 March — 5 percentage points below the same date last year and well beneath the five-year seasonal average, according to Kyos European Gas Analytics.
Germany is among the most exposed, with facilities only 22.3% full, down nearly 7 percentage points year-on-year.
France is similarly positioned at 22.1%.
The Netherlands is the most critical case on the continent: storage there has fallen to just 6.0%, or 9 TWh — less than a third of last year’s level and well below the historical minimum for this time of year.
The contrast with the Iberian Peninsula could hardly be sharper.
Portugal enters the crisis with tanks at 85.3% full, while Spain sits at 55.5% — both countries benefiting from greater LNG import infrastructure, lower gas dependency in their electricity mix, and a renewables buildout that has structurally reduced their exposure to wholesale gas price swings.
How high could European gas prices rise?
The supply shock at the origin is structural, not transitory.
Qatar — the world’s second-largest LNG exporter at 84 billion cubic metres annually, and a key supplier to EU member states including Italy, Belgium and Spain — has confirmed it can no longer honour contractual obligations following Iran’s attacks earlier this month on the Ras Laffan Industrial City.
Repairs to the damaged capacity could take up to five years.
In a research note dated 22 March, Goldman Sachs raised its second-quarter 2026 TTF forecast to €72/MWh from €63/MWh, warning that European storage will need to attract LNG cargoes away from competing Asian buyers to fill adequately before next winter.
An adverse scenario — in which Hormuz energy flows remain depressed for ten weeks rather than six — could push the Summer 2026 TTF average above €89/MWh, according to the bank.
A severely adverse scenario, incorporating greater long-term damage to Qatari infrastructure, could see TTF above €100/MWh throughout the summer months.
A poll of energy analysts conducted by Montel News puts even sharper numbers on those risks.
Should Hormuz remain suspended for three months, the front-month TTF contract could rise to around €90/MWh according to Wood Mackenzie and Montel Analytics.
At the upper end, Ole Hvalbye, commodities analyst at Swedish bank SEB, warns prices could range from €115 to €155/MWh in that scenario, as roughly 28.6 billion cubic metres of LNG would be removed from the global market.
A six-month closure, the poll suggests, would push average TTF to nearly €160/MWh — what Hvalbye described as a “2022-style squeeze or worse,” with prices potentially ranging between €145 and €240/MWh, and filling storage for next winter becoming “close to impossible.”
For context, TTF peaked at €345/MWh in August 2022 following Russia’s invasion of Ukraine.
What this means for household energy bills
For European households, the shock is real but unevenly transmitted across energy bills.
In an exclusive interview with Euronews, Giuseppe Moles, chief executive of Acquirente Unico, the Italian public body that manages energy supply for regulated-market customers, broke down the transmission channel.
On gas bills, the pass-through is direct. Italy’s regulator ARERA had set the commodity component for protected customers at €35.21/MWh for February — but warned that figure did not yet reflect the post-escalation price surge.
Electricity prices are also rising, as higher gas costs feed into wholesale power markets, but the impact is more diluted at the retail level.
“The electricity market is already incorporating part of the gas shock,” Moles said, estimating the effect on household bills at a few percentage points — noticeable, but far below the 60–70% jump seen in wholesale gas.
On fuels, the pressure extends beyond crude, with higher freight rates, insurance premiums and refining constraints pushing up costs across the supply chain.
“The real bottleneck is refining,” Moles said.
Italy is already boosting gas supplies from Algeria: Will this be enough?
While Italy is better placed than the EU average — with gas storage levels at 43.9% — Moles warned that the immediate threat is one of price rather than physical shortage.
That context helps explain Prime Minister Giorgia Meloni’s outreach to Algeria, already Italy’s largest gas supplier via pipeline.
Moles described the move as “a rational and important choice,” noting Algeria’s role in strengthening supply security.
But he also cautioned against overestimating its impact. “Algeria can attenuate the impact for Italy, but cannot alone neutralise the effects of a systemic crisis in the Gulf,” he said, underscoring how disruptions around the Strait of Hormuz continue to shape global energy pricing beyond any single bilateral relationship.
“I would not expect a repeat of the 2022 scenario, but rather a phase of heightened volatility with sustained price spikes. Much will depend on the resilience of supply and the trajectory of global demand in the coming months,” Moles said.
What could be the impact on inflation?
The disinflationary trend Europe has experienced over the last three years is over, at least for the near term.
Goldman Sachs expects Euro area headline inflation to jump to 2.7% year-on-year in March — up sharply from 1.89% in February — driven almost entirely by energy, which is forecast to swing from -3.1% to +5.9% year-on-year in a single month.
The medium-term trajectory has shifted just as abruptly: Goldman Sachs now sees headline inflation averaging 2.9% across 2026 and peaking at 3.2% in the second quarter, a path that would have been considered a tail risk at the start of the year.
Core inflation — which strips out energy and food — is also expected to drift higher, reaching 2.5% in Q3, as energy costs begin feeding through into services prices and transport costs.
The pass-through will not be uniform: Germany faces a diesel price shock of roughly 25% month-on-month as of late March, while Spain has partially cushioned the blow by halving VAT on most energy sources.
“We look for German headline HICP inflation to increase to 3.0% year-on-year in March from 2.0% year-on-year in February,” said Goldman Sachs economist Katya Vashkinskaya in a note this week.
But the direction is the same everywhere.
The window in which the ECB could credibly argue it was on track to its 2% target has closed.
What higher inflation means for interest rates and the growth
For the European Central Bank, the calculus has flipped in a matter of weeks.
Before the war in Iran began, markets were pricing further rate cuts through 2026. That conversation is now over.
Goldman Sachs and ABN AMRO both expect the Governing Council to raise rates by 25 basis points at its April 30 meeting and again in June, pushing the deposit rate to a peak of 2.5%.
Bundesbank President Joachim Nagel had already called publicly for an April hike if energy price pressures did not abate.
According to prediction markets, there is a 77% chance the ECB will hike interest rates this year
In an adverse scenario, Goldman Sachs estimates rates may need to rise 75–100 basis points in total; in a severely adverse scenario, as much as 150–200 basis points.
The timing is deeply uncomfortable.
Goldman Sachs downwardly revised Euro area GDP growth for the full year to 0.7% — nearly half the pre-conflict trajectory — as tighter financial conditions compound the demand shock from higher energy bills.
The eurozone composite PMI for March came barely above stagnation, with input costs rising at their fastest pace in three years.
“The ECB is no longer in a good place,” said Chris Williamson, chief economist, S&P Global, on the March 2026 flash PMI.
Is this as bad as 2022?
Not yet — and possibly not at all, according to Bill Diviney, head of macro research at ABN AMRO.
“The shock is unlikely to be nearly as large as the 2022-23 energy crisis that resulted from Russia’s invasion of Ukraine, and will not hit eurozone economies as uniformly as back then,” he said in a recent note.
The clearest sign of this is in electricity markets: while gas prices have surged 80% year to date, average wholesale electricity prices for the five largest eurozone economies have barely moved since the conflict broke out, and remain around 14% lower year-to-date.
That decoupling reflects the acceleration in Europe’s renewables buildout since 2022 and the return of France’s nuclear fleet to full capacity — a structural shift that is now acting as a partial buffer.
The fiscal response is also likely to be more limited: governments are more constrained, bond markets are less forgiving, and policymakers are more conscious than they were in 2022 of the inflationary risks that come with untargeted energy support.
The 2022 crisis was a systemic shock that exposed every vulnerability Europe had built up over decades of cheap Russian gas. This one is more targeted, more uneven — and, for now, more manageable.
The question is how long that remains true.
