The European gas market is under renewed strain. A combination of colder winter weather, declining gas reserves and rising geopolitical tensions has pushed prices sharply higher in a short period of time. What does this mean for consumers, businesses and the months ahead?
Gas prices jump after a calm period
After a relatively quiet autumn and a mild start to winter, gas prices in Europe have risen sharply in recent weeks. The Dutch TTF gas price, short for Title Transfer Facility, Europe’s main benchmark for natural gas, is back above €37 per megawatt-hour (MWh). Just last December, prices were still hovering around €28 per MWh.
That represents an increase of more than 30% in only a few weeks. For those who believed the energy crisis was firmly behind us, this sudden move is a clear reminder that the market remains fragile.
Cold weather pushes gas demand higher
The most immediate cause of the price increase is cold winter weather. Just a few days of freezing temperatures were enough to significantly boost demand for natural gas. Across Europe, gas is still widely used for heating homes, generating electricity, and powering industrial processes.
When temperatures drop, heating systems switch on almost everywhere at once. That surge in demand is quickly reflected in higher gas consumption. Because supply cannot instantly increase, prices react rapidly.
Gas storage levels below seasonal average
The higher demand is clearly visible in Europe’s gas storage levels. At present, gas reserves are around 52% full, which is below the historical average for this time of year.
Normally, gas storage levels continue to decline until late March, when spring arrives and heating demand drops sharply. After that, Europe enters the refilling season, during which gas is injected into storage facilities to prepare for the next winter.
The usual target is to reach around 90% storage capacity by the start of autumn. That target was not met last year: reserves peaked at just 83.2%. A weaker starting position makes the market more sensitive to bad weather or supply disruptions.
Why low gas reserves matter
Gas storage acts as a buffer. It helps absorb spikes in demand and reduces Europe’s reliance on immediate deliveries via pipelines or LNG shipments (liquefied natural gas).
When that buffer shrinks, uncertainty grows. Market participants start to question whether there will be enough gas if winter conditions worsen or if supply problems emerge. That uncertainty alone is often enough to push prices higher.
Geopolitical tensions add to market anxiety
In addition to weather-related factors, geopolitical risks are playing an important role. International tensions are rising, including disputes involving Iran and Greenland, as well as broader uncertainty around global power relations.
Although Europe is less dependent on Russian gas than it was before 2022, the energy system remains vulnerable. Natural gas is traded on a global market, meaning events far outside Europe can influence prices here.
When tensions rise, traders worry about potential disruptions to:
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LNG transport routes,
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international trade flows,
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or sanctions that could limit energy supply.
Even the fear of such disruptions is often enough to drive prices up.
The role of speculation and short sellers
Market observers note that the recent price surge is not purely driven by fundamentals such as supply and demand. Trading dynamics and speculation also play a role.
In particular, short sellers have contributed to the move. Short sellers are investors who bet on a decline in prices. They sell gas contracts they do not own, expecting to buy them back later at a lower price.
When prices rise instead of falling, losses can quickly accumulate. At some point, these traders are forced to close their positions by buying gas contracts. That additional buying pressure pushes prices even higher.
What is a “short squeeze”?
This mechanism is known as a short squeeze. In simple terms:
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Many traders expect prices to fall and open short positions.
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Prices unexpectedly start to rise.
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Short sellers rush to buy and close their positions.
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This wave of buying pushes prices up even further.
The result is a self-reinforcing price move. The higher prices go, the more short sellers are forced to buy, which can cause sharp and sudden price spikes that go beyond what fundamentals alone would suggest.
What does this mean for consumers?
For households, the impact is not immediate. Many consumers are on fixed energy contracts or tariffs that only adjust periodically. However, caution is warranted.
People with:
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variable-rate contracts,
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new energy contracts,
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or contracts that expire in the coming months,
may face higher energy bills if elevated gas prices persist.
Gas prices also indirectly affect electricity prices, since gas-fired power plants still play a key role in electricity generation across Europe.
Impact on businesses and the broader economy
For energy-intensive industries, the effects are more immediate. Higher gas prices mean:
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rising production costs,
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pressure on profit margins,
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and potentially higher prices for consumers.
At the macroeconomic level, sustained high gas prices could reignite inflation, just as central banks are hoping for price stability to take hold.
Outlook: what lies ahead for the rest of winter?
The future direction of gas prices will depend on several key factors:
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How cold the rest of the winter turns out to be,
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How quickly gas reserves continue to fall,
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Whether geopolitical tensions escalate or ease,
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And whether speculative positions unwind further.
If winter conditions remain mild, pressure on prices could ease quickly. But if cold weather persists or new geopolitical shocks emerge, the gas market may remain volatile.
Conclusion: energy security remains a key issue
The recent rise in gas prices shows that energy security remains a strategic and economic priority for Europe. Despite investments in renewable energy and LNG infrastructure, natural gas continues to play a central role in the energy system.
For consumers, businesses and policymakers alike, the message is clear: the energy market is calmer than during the peak crisis years, but it is far from stable. Vigilance remains essential.
