Strait of Hormuz closure: mitigation through relaxed EU storage regime?

Escalating tensions in the Middle East have already disrupted shipping through the Strait of Hormuz, one of the world’s most important routes for global oil and LNG trade. The disruption has raised concerns about LNG exports from Qatar and increased competition for cargoes between major importing regions. As a result, European gas markets could face higher prices while storage levels are drawn down more quickly, adding pressure to secure supplies ahead of winter. Florian Boehnke, Alex Froley and Andreas Schroeder outline several disruption scenarios to examine the potential implications for European gas prices, LNG availability and storage levels. The findings suggest that even a short disruption could trigger an immediate price spike, while a longer blockade would push prices higher for a sustained period and tighten the market for months. They report also considers a possible policy response from the EU, in which regulators relax gas storage requirements to help ease short term price pressure. While this could soften the initial market reaction, it would leave Europe with lower reserves heading into winter and increase the risk of supply shortages later in the year

The conflict in the Middle East has escalated sharply over the past week, with military strikes and retaliatory actions intensifying between the United States, Israel, Iran and neighboring countries. This has led to an effective blockade of the Strait of Hormuz, a critical chokepoint for global energy trade, particularly crude oil and LNG, with tanker traffic largely at a standstill amid heightened risks and insurance cancellations.

European gas price benchmark ICIS TTF month-ahead has spiked to above €54.19/MWh on 3 March 2025, nearly doubling last week Friday’s levels. Markets react to tightening supplies, disrupted flows and broader uncertainty.

Meanwhile, direct attacks on key Gulf energy infrastructure, including confirmed strikes on Qatar’s Ras Laffan facilities, one of the world’s largest LNG export hubs, have forced production shutdowns and raised new questions about liquefaction capacity and export restart timelines.

Updating our previous analysis: short-term disruption scenarios

A major unknown is how long the strait will remain blocked, and for how long key LNG facilities may be offline. We investigate this central risk factor for global gas markets.

In our previous report, we simulated a three-month closure of the Strait of Hormuz to assess the structural impact of a prolonged supply disruption on European gas markets. That analysis illustrated how sustained LNG shortages would materially tighten the European balance and elevate prices over several months.

At present, however, the duration of the disruption remains highly uncertain. It is unclear whether the current escalation will result in a short-lived interruption or a more persistent geopolitical conflict. Given this uncertainty, we focus on short-term disruption risks and potential regulatory responses within the European Union. We therefore add model scenarios with a 4-week-closure based on our Gas Foresight model.

Scenario 1: Four-week blockade under current EU regulation

Scenario 1 assumes a four-week blockade of the Strait of Hormuz. During this period:

No contracted or spot LNG volumes from Qatar are available.

EU gas storage regulation and fullness trajectory remain unchanged.

Scenario 2: Four-week blockade under regulatory flexibility

Scenario 2 builds on the same four-week blockade but introduces regulatory flexibility along two dimensions.

The pre-winter storage target is reduced by 10 percentage points, from 80% to 70%.

Interim constraints are removed. The end-of-winter 2025/2026 minimum level is lifted and no binding summer refill trajectory is imposed. Member states retain flexibility in timing injections, provided the reduced pre-winter target is met.

This scenario represents a potential political response aimed at alleviating short-term price pressure by lowering mandatory injection volumes and increasing temporal flexibility.

Scenario 3: Three-month Blockade

Scenario 3 assumes the closure of the Strait of Hormuz to persist for three full months until the end of May 2026. This scenario mimics scenario 1 but extends the closure duration.

Scenario 1 Scenario 2 Scenario 3
Duration of closure 4 weeks 4 weeks 12 weeks
EU storage regime No change Relaxed No change

Price assumptions in the disruption scenario:

From an ex-ante perspective, a temporary restriction of LNG exports via the Strait of Hormuz tightens the global LNG supply–demand balance and exerts upward pressure on spot LNG prices. The strongest tightening occurs during the blockade period itself, followed by continued competition for replacement cargoes and storage replenishment after reopening.

The disruption scenarios therefore incorporate a temporary increase in spot LNG prices reflecting both the physical supply constraint and sustained competition between major importing regions, particularly Asia and Europe.

Hormuz disruption and the storage dilemma

The four-week blockade scenario produces an immediate and strong price reaction broadly in line with recent market behaviour seen on 3 March 2026. The March TTF contract rises to around 60 €/MWh, reflecting the sudden loss of Qatari LNG and intensified competition for global cargoes. After reopening of the Strait of Hormuz, April prices fall to roughly 40€/MWh, while May remains elevated at around 42€/MWh. Over the summer, prices stabilise in the mid to high 30€/MWh range, approximately 20% above the pre-war forward curve for the same period, as storage refill requirements continue to support demand. Markets comply with the current EU storage regime.

As crisis response, regulators may address the difficulties of refilling gas storage during summer 2026. Under the regulatory flexibility scenario, lowering the pre-winter storage target to 70 % and removing binding end-of-winter and summer injection trajectories significantly dampens the initial spike, with March prices around 53 €/MWh, April near 41 €/MWh, and May around 39 €/MWh. However, because storage still needs to be replenished ahead of winter, stronger imports later in the season lead to a summer price pattern broadly similar to Scenario 1. This indicates that regulatory flexibility mainly smoothens short-term price peaks rather than fundamentally reducing overall market tightness.

This outcome is consistent with the model’s aggregated storage behaviour. When regulatory constraints are lifted, end-of-winter storage levels decline to approximately 230 TWh (21%) in West & Central Europe1

This is almost 40TWh below Scenario 1 and around 45 TWh below the pre-war baseline. Moreover, the minimum storage level is reached nearly six weeks later than in the pre-war model results.

The lower buffer levels illustrate how increased short-term flexibility reduces the immediate scarcity signal but materially weakens Europe’s strategic storage cushion ahead of the next winter. This effectively lowers security of supply for the upcoming heating season, shifting today’s price exposure into a higher risk of scarcity during winter. These regulatory options therefore require careful consideration, as they represent a clear trade-off between short- term price relief and medium-term supply security.

1 West & Central Europe: Great Britain plus 11 EU countries Austria, Belgium, Czechia, France,
Germany, Hungary, Italy, Netherlands, Poland, Slovakia, Spain.

Florian Boehnke is Senior Quant Gas Analyst, Alex Froley is Lead LNG Analyst, and Andreas Schroeder is Head of Gas Analytics at ICIS.