The gas market held hostage by geopolitics: is $850 the (un)limit?

The start of 2026 finally shattered any illusions about the stabilization of the global gas market. Despite the expected growth in LNG supply and the gradual balancing of demand, the conflict in the Middle East has brought back to the market what seemed like a relic of previous crisis years: price chaos, supply unpredictability, and the effective loss of the ability to make long-term forecasts.

Today, the price of gas is no longer determined by the balance of supply and demand, but largely by the geography of the conflict and the radius of damage to critical infrastructure.

On the eve of the massive strikes in the Middle East, spot gas prices in Europe remained below $400. Since the operation began over the weekend, when the exchanges were already closed, an immediate panic shock and a sharp spike were avoided. However, within the first week of hostilities, the market caught up with reality: prices rose by 60%, to $622 per thousand cubic meters, the highest level since 2023. The peak was recorded on Monday, March 9—approximately $700. This was the market’s reaction to rising oil prices and the escalating situation in the region.

As it turned out, that was not the limit. Following Israel’s recent strikes on Iran’s massive South Pars field and the subsequent retaliation, during which the world’s largest LNG plant, Ras Laffan in Qatar, was damaged, the market entered a phase of outright panic. On March 19, futures jumped another 35% for the first time since December 2022, reaching $850 per thousand cubic meters.

Alarming statements from QatarEnergy indicated that the attack had knocked out nearly 17% of Qatar’s LNG export capacity—Qatar being one of the world’s major suppliers of the resource—for 3–5 years. The company will likely have to invoke force majeure on long-term contracts. This means that the market is facing not just a short-term shock, but a potentially long-lasting structural shortage that could reshape the global supply landscape for years to come.

What is driving the rise in gas prices?

First, the risks associated with physical LNG shipments. A blockade or even partial restriction of traffic through the Strait of Hormuz threatens approximately 20% of global liquefied natural gas trade. Added to this are LNG fleet downtime and production shutdowns, which mean significant shortfalls in deliveries to end consumers.

Reopening the route is just one step toward restoring market balance, but it’s important to remember that repairing damaged facilities or building new ones will take additional time. Statements from QatarEnergy directly confirm this.

Second, a sharp intensification of competition between Europe and Asia. Nearly 80% of Qatar’s LNG has traditionally been destined for Asian countries. Losing even a portion of these volumes means an aggressive redistribution of flows. First and foremost, there is a battle for resources with the U.S., which is already exporting at maximum capacity—approximately 430 million cubic meters per day. As a result, a classic demand-driven price war is unfolding: Asia is raising premiums, and cargoes are heading there. This was the case with vessels redirected from the EU to China, Taiwan, and other countries in the region.

Third, the oil effect. On peak days, Brent crude rose to $110–120 per barrel with daily volatility of 10–15%. This not only affects energy markets but also increases costs for logistics, insurance, and production, creating additional inflationary pressure on industry. The consequences of this are already being felt by end consumers, particularly due to rising fuel prices.

Fourth, Europe’s vulnerability. As of March 16, EU gas storage facilities held 29% of their capacity. This means the region is entering the injection season with half-empty storage facilities, and every new LNG shipment becomes critically important. Under such conditions, even minor disruptions in supply inevitably affect prices.

All of the factors listed above create a cascading negative effect on the entire supply chain—from manufacturers to end consumers. Armed aggression and military unpredictability lead to market chaos, an increase in the cost of insuring ships and cargo from 0.25% to 1.5% or even 3%, complications in delivery routes, increased pressure on the spot market, and a reassessment of premiums for expedited delivery. This is by no means an exhaustive list. We are already seeing that 13 empty LNG tankers have changed course, and Qatar is forced to charter out vessels currently off the west coast of Africa.

Even in the event of a partial or complete de-escalation in the Middle East, the market will not return to its previous state instantly: restoring logistics chains, stabilizing flows, and rebuilding confidence will take time. Therefore, the risk premium will remain embedded in the price, and volatility will remain a structural characteristic of the market.

Gas prices in Ukraine are 16% lower than in Europe

The Ukrainian market effectively imports external volatility. While the price is fixed for the population and part of the regulated segment, industry is dependent on the global situation. Since Ukraine is forced to rely on imports, any tension in the LNG market, a spike in European prices, or a new logistical risk is mirrored in the domestic market.

Recent experience has shown that during this crisis, Ukrainian gas prices were approximately 16% lower than European prices, or nearly 4,300 UAH per thousand cubic meters. On the peak day of March 9, the price of gas on the Dutch TTF hub was nearly 30,000 UAH, while in Ukraine it traded at less than 23,000 UAH—a difference of over 23%. This gap is temporary and is explained by seasonal factors, particularly the end of the heating season and the availability of gas in underground storage facilities.

Despite the relatively lower price, global market conditions are already pushing up the cost of products in related industries. Under these conditions, companies will gradually move away from a mode of restrained consumption and more actively build up gas reserves—both for production needs and with an eye toward future sales of products at higher prices. This will increase demand for gas in the domestic market, reduce available gas volumes, and create additional price pressure. Under these conditions, gas prices will trend upward.

Every such crisis or unforeseen event in the world clearly demonstrates: the closer we are to meeting consumption through our own production, the less impact external volatility has on the domestic market. Domestic resources not only reduce import dependence but also ensure greater price predictability for industry and stability of the energy system. For Ukraine, this is not just an economic issue but also a matter of national security.