European gas prices have surged to over 90 euros per megawatt-hour, marking the highest level since late 2022. Goldman Sachs analysts warn that prices could climb further, reaching 150 euros, if Middle Eastern LNG exports remain at only a quarter of normal levels and a harsh winter increases heating demand. The firm's base case forecasts prices at 70 euros by year-end, assuming improved Middle Eastern supply and reduced risk premiums.
Goldman's latest report highlights ongoing concerns over Middle Eastern supply stability, with recent attacks on ships in the Strait of Hormuz contributing to uncertainty. While crude oil exports from the Gulf have remained near 2025 averages, refined product exports are significantly lower due to refinery outages. The analysts also note that LNG crossings through Hormuz have declined, raising fears of further supply constraints.
The report underscores the broader implications of these developments, noting that the Bloomberg Commodity Index has delivered a 36% return this year, outperforming equities and bonds. Analysts suggest this reflects a period of scarcity driven by resource nationalism, adverse weather, and supply disruptions. The firm warns that geopolitical tensions and colder-than-average winters could push prices even higher, with Brent crude potentially reaching $140 in early 2027.
Despite the risks, Goldman maintains a cautious outlook, emphasizing that a recovery in Middle Eastern supply could help stabilize prices. However, the analysts stress that the current environment remains volatile, with multiple factors influencing energy markets. The firm's warnings highlight the need for continued monitoring of supply chains and geopolitical developments in the region.
The recent price surge underscores the fragility of global energy markets, with Europe particularly vulnerable to supply shocks. As demand for heating rises and LNG exports remain constrained, the risk of further price spikes remains elevated. Investors and policymakers are advised to closely track developments in the Middle East and prepare for potential market volatility.