Dutch TTF gas futures climbed to over €65 per megawatt-hour on Thursday, the highest level since March, as European gas prices surged 130% in 2026 and Oxford Economics warned that the worst may still be ahead. The numbers are doing the talking. Households, factories and commuters will hear them later, when the bills land and the heating season starts biting.
The State's Buffer Runs Thin
European gas storage was only around 57% full at the beginning of August, with Gas Infrastructure Europe data showing 57.1% on August 1, the lowest reading for that point in the year in the historical series. The EU's rules still target 90% storage, though countries now have more flexibility over when they reach it. The target can be met between October 1 and December 1, and Brussels has encouraged countries to consider using that flexibility to reduce the target to 80% when market conditions make filling more difficult. So much for the grand machinery of planning. The apparatus sets a target, then quietly asks governments to lower it when the market gets awkward.
Oxford Economics said several adverse supply-side risks have materialised and gas storage levels are historically low ahead of the heating season. It expects to raise its European gas price forecast in September, potentially to an average close to €60/MWh during the fourth quarter of 2026 and first quarter of 2027, below where prices traded on Thursday. The firm said Europe has cut gas consumption by roughly 15% to 20% compared with 2021, helped by lower industrial use, expanded renewables and heat pumps replacing some gas-fired heating. It also said global LNG supply has increased and Europe has more import terminals, making an outright physical shortage far less likely than during the 2021-2022 crisis. But lower consumption hasn't removed Europe's biggest vulnerability, because the relationship between temperature and gas demand remains almost perfect.
Winter, Markets, and the ECB
Last winter, when temperatures briefly fell below the long-term average, Europe’s gas savings versus pre-2021 levels narrowed to only 5% to 10%. Storage remains the buffer between a normal winter and a supply shock. When inventories are high, traders can absorb a cold snap without bidding aggressively for new cargoes. When inventories are low, every colder-than-expected week becomes a race for supply. That race is not abstract. It is the market deciding who pays, who waits, and who gets squeezed first.
The gas rally is also an inflation story and potentially a problem for the European Central Bank. Oxford Economics estimates that eurozone headline inflation could run closer to 3.5% in the second half of 2026 under current wholesale gas pricing, versus just above 3% in its latest baseline. The ECB has already raised rates in response to an energy-driven inflation shock, and markets widely expect another 25-basis-point hike in September. The ECB's own June projections showed headline inflation remaining elevated because of higher energy prices, with inflation expected to reach 3.4% in the third and fourth quarters of 2026. The central bankers will call it price stability. Everyone else gets the bill.
Who Pays First
The impact will vary sharply across Europe. Germany and Austria tend to have longer fixed-price contracts, slowing transmission. France, Italy and Spain respond faster. In the Netherlands, the pass-through is almost immediate. Italy stands out because it combines relatively fast price transmission with heavy reliance on gas, and Oxford Economics identifies it as the most exposed large European economy to a gas price shock. Different countries, same hierarchy: the shock starts at the top of the market and works its way down to ordinary people, with some states buffering the blow longer than others.
The pressure is not confined to gas. Diesel refining margins in Europe, Asia and the U.S. have surged to unprecedented levels amid the Iran war energy crisis, with European diesel cracks above $75 a barrel. Buffers from pre-war stockpiles are largely depleted, adding to the strain across energy markets. Gas prices remain well below the €350/MWh peak reached during the 2022 energy crisis triggered by Russia's invasion of Ukraine, but the combination of high prices, low storage and geopolitical disruption has left Europe vulnerable to a costly winter. The continent's rulers can keep talking about resilience. The storage tanks, the futures markets and the inflation forecasts tell a harsher story.