Gas market overview Q2 2026

Geopolitical Tensions Define Q2

• Geopolitical risk overshadows the injection season
• European Gas Storage: A slow and structurally challenged injection season
• The fight for LNG cargoes intensifies
• Q3 Outlook: Injection season enters critical phase under renewed conflict risk

Geopolitical risk overshadows the injection season

The second quarter of 2026 opened in the shadow of the crisis that defined Q1: the US-Israel war against Iran, the closure of the Strait of Hormuz, and the strike on Qatar's Ras Laffan complex that took an estimated 17% of Qatar's LNG production capacity offline for an expected 3-5 years. Where Q1 was defined by the shock itself, Q2 was defined by the market's attempt to price a conflict that refused to resolve cleanly - a pattern of ceasefire, violation, and re-escalation that repeated multiple times over the quarter and is repeating again as this report is being written.

A more substantial diplomatic step came on 17 June, when the US and Iran signed a memorandum of understanding intended to end the war and reopen the Strait of Hormuz, with 60 days set aside for negotiations on the harder issues - Iran's nuclear programme, the administration of the strait, and the release of roughly $6 billion in frozen Iranian assets. Markets treated this as the closest thing to a durable resolution the quarter had produced, and TTF eased through most of June as the market began to price in a gradual normalisation of Qatari flows.

That optimism proved rather short-lived. On 7-8 July, Iran struck three commercial tankers and a Qatari LNG carrier in the Strait of Hormuz. The US responded with strikes on roughly 80-90 targets in Iran, revoked the sanctions waiver that had permitted continued Iranian oil sales, and President Trump declared from the NATO summit in Ankara that the ceasefire was "over," while leaving the door open to continued talks. Iran retaliated with strikes on US-linked sites in Bahrain and Kuwait. TTF front-month (now referencing the August 2026 contract) pushed back up toward the 50 €/MWh area (see Fig. 1). As of the time of writing, it remains to be seen how the situation will develop further.

The average price of the ICE Endex TTF front-month benchmark during Q2-26 was 45.635 EUR/MWh. Forward contracts for the nearest full month, August 2026, closed at 43.44 EUR/MWh on June 30th.

The forward curve moved into backwardation for 2026 during March, meaning every month forward on the curve is cheaper than the previous, and the backwardation still exists (see Fig. 2). There is sharp drop in the prices on the forward curve from Mar27 to Apr27 and then again rest of the CAL27 is in backwardation.

European Gas Storage: A slow and structurally challenged injection season

Europe entered the second quarter in a weak position: storage had fallen below 30% of capacity by the end of Q1, among the lowest starting points for an injection season in years. The central question for Q2 was whether injections could catch up, and the answer so far is no.

Recovery has been real but slow. From that sub-30% low, storage rebuilt to slightly below 50% by the end of June - a meaningful improvement in absolute terms, but one that still leaves the EU aggregate roughly 15 percentage points below both the same point last year and the five-year seasonal norm (see Fig. 3). Analysts differ somewhat on where Europe will end the injection season, but the base case is somewhere between 75-78%. This would be comfortable enough in a mild winter, though it would leave less margin for error should temperatures turn cold.

The underlying economics have not become materially more supportive since Q1. The TTF forward curve has spent much of the quarter in backwardation, meaning summer gas remains more expensive than winter gas - the opposite of the price signal that would normally reward storage operators for injecting (see Fig. 4). This removes much of the commercial incentive to fill storage on a purely market-driven basis, and continues to push the burden of refilling onto policy intervention rather than price arbitrage. Italy has again used a direct incentive scheme compensating market participants for negative summer-winter spreads, a mechanism carried over from the previous cycle. Germany, which carries the largest structural storage risk in the Northwest European network given its central pipeline position, has so far avoided direct intervention.

Two additional pressures are worth flagging. First, the slow and uneven return of Qatari LNG means Europe cannot yet rely on a clean restoration of pre-war supply volumes to ease the injection task. Secondly, as will be discussed below, the June-July heatwaves add demand pressure at precisely the point in the calendar when every available cargo should ideally be going into storage. The combination of a backwardated curve, a still-recovering LNG supply chain, and heat-driven power sector gas demand means the injection season, while progressing, remains structurally behind where Europe would want to be with the heating season roughly four months away.

The fight for LNG cargoes intensifies

If Q1 was about the initial shock of losing roughly a fifth of global LNG supply overnight, Q2 was about who absorbed that shock first - and the answer, more often than not, has been Asia rather than Europe. Qatari cargoes that would ordinarily have gone west have instead been redirected toward intra-Gulf deliveries and Asian buyers. As Qatari LNG flows have only resumed gradually and partially then Europe - the region without long-term contractual cover - has borne the brunt of it.

Asian spot LNG demand reached a five-month high in June, driven by a heatwave in Japan and an industrial-led demand recovery in China. For Europe, this matters directly: every cargo that Asian buyers succeed in locking up is a cargo that will not be available here. The Asia-Europe LNG premium remains a genuine two-way risk for European buyers - a structural signal of where the marginal cargo is likely to go when the two regions compete for the same limited pool of flexible supply.

Europe faced its own version of the same squeeze at home. An unusually early and severe run of heatwaves - a first from late May, a second and more severe one from 17 June that pushed France to its hottest day since records began in 1947 (40.9°C in Paris), with Germany also passing 41°C - pushed cooling-driven electricity demand up sharply (French daily demand rose almost 20% over two weeks, per Eurelectric) just as wind output fell and EDF was forced to cut nuclear generation due to river cooling-water limits. With wind down and nuclear constrained, gas- and coal-fired plants stepped in as the marginal source.

The net effect is that a material and growing share of European gas this quarter went into power burn for cooling rather than storage injection. Domestic heat and Asian competition were pulling on the same limited pool of cargoes from opposite directions, and compounding the slow-injection problem described above.

Q3 Outlook: Injection season enters critical phase under renewed conflict risk

Heading into the third quarter, the European gas market carries forward Q2's unresolved tensions. The central fact for Q3 is that storage sits meaningfully below both last year's level and the five-year norm while injection rates remain below the pace required for the EU's relaxed 80% target, and the window to close that gap before winter demand returns is narrowing.

The reopened Iran-US conflict is the dominant near-term risk. With both sides having exchanged strikes on consecutive days as this report is being finalised, the realistic range of outcomes for Q3 spans from a renewed, Pakistan- or Gulf-mediated de-escalation (the pattern that has repeated twice already this year), through to a more sustained reopening of hostilities that would delay Qatari LNG's return to pre-war volumes even further.

On storage, the outlook is tight but still manageable: reaching an adequate autumn fill level is still achievable if injection rates accelerate materially through July and August, but it will very likely require continued policy support - further incentive schemes rather than the price signal doing the work on its own, since the curve shows little sign of moving out of backwardation. On the demand side, continued Asian heat and Chinese industrial recovery are likely to keep JKM firm and sustain the competition for flexible cargoes that has characterised the year so far, while a repeat of extreme European summer temperatures (a live risk given this year's early and severe pattern) would again divert gas toward power burn rather than storage.

Taken together, Q3 looks set to be another quarter in which European gas prices trade less on European fundamentals in isolation and more on the combined read-through of Middle East escalation risk, the pace of Asian LNG absorption, and weather-driven power sector demand on both continents. Volatility is likely to remain elevated, and the injection season's outcome - whether Europe enters winter with a genuine buffer or another thin cushion - is unlikely to be settled until late Q3.

This market overview is for informational purposes only. We aim to compile the most relevant data from various sources in good faith but the analysis should not be treated as an advice or taken as the sole basis for any action.