European natural gas traders are increasingly turning to options markets to protect against a potential surge in prices next winter, as ongoing conflict in the Middle East continues to disrupt global energy flows, according to a report by Bloomberg.
Recent options activity over the past week indicates that market participants are positioning for European benchmark gas prices to climb toward €100 per megawatt-hour during the peak winter season — more than twice current levels. The positioning reflects growing concern that prolonged geopolitical tensions could further complicate Europe’s already sluggish efforts to rebuild gas inventories ahead of the heating season.
A key pressure point remains the Strait of Hormuz, a critical transit route for global LNG shipments, which has been effectively disrupted since hostilities escalated in late February. The disruption has curtailed a significant share of global liquefied natural gas supply, tightening international markets and intensifying competition for available cargoes. Although most Middle Eastern exports typically flow to Asia, the broader impact has contributed to higher volatility across global benchmarks.
European gas prices have already climbed more than 40% since the conflict began, with benchmark contracts recently trading near €47 per megawatt-hour.
Market volatility, as reflected in options pricing, has eased from the immediate post-shock highs but remains significantly elevated compared with the start of the year — more than three times higher. At the same time, options positioning for January delivery shows rising demand for upside protection, with call skew widening by roughly four percentage points over the past week, signalling increased hedging against a potential winter rally.
Storage fundamentals are also drawing attention. Europe’s gas inventories are currently around 34% full, lagging well behind the five-year seasonal average of 45%. While seasonal drawdowns are typical during winter, the pace of replenishment this year has been notably slow, adding to market sensitivity as the next storage cycle approaches.
