Expert analysis
The European gas market has seen a significant turnaround in recent days. The TTF front-month contract has dropped by more than 30% from last week’s peak and is now trading around €50/MWh.
At first glance, this rapid and sharp correction may seem reassuring. However, the underlying dynamics suggest a much more complex picture.
What is driving gas prices now?
Several factors are currently influencing price movements, not all of which can be considered lasting fundamental changes.
Hopes of geopolitical easing
In recent days, the market has started to price in the possibility of easing tensions in the Middle East. However, it is important to note that this shift is largely headline-driven and not yet supported by concrete, lasting fundamental developments.
Divergence between volatility and fundamentals
While prices have declined significantly, the fundamentals of the physical market have not meaningfully improved.
LNG capacity at Ras Laffan Industrial City in Qatar remains constrained, which is a key factor for global supply.
At the same time, shipping conditions in the Strait of Hormuz remain uncertain, continuing to pose a supply risk.
Weather and demand destruction
Milder weather forecasts in Europe have also contributed to the decline in prices. Lower temperature volatility reduces gas demand, exerting short-term downward pressure on prices.
At the same time, the high price levels seen in recent weeks have already triggered demand destruction, allowing the market to gradually move back toward balance.
The Strait of Hormuz remains a key risk
Although Iran has indicated that “friendly” vessels may be allowed to pass, the practical interpretation of this remains unclear.
LNG shipments are expected to be among the last to return to the region, meaning the Strait of Hormuz continues to be one of the most critical risk points in the global energy market.
What does this mean for the market?
The current price drop is driven more by improving market sentiment than by a genuine fundamental shift.
Supply-side risks have not disappeared, and without a rapid and stable normalization—especially in LNG supply—prices could move higher again.
Overall picture: the market has calmed, but it’s too early to relax
While the market has stabilized in the short term, underlying risks remain.
Current price levels do not necessarily reflect a sustainable equilibrium, but rather the result of a temporary correction.
The key message is clear: volatility is here to stay, and the direction of the market in the coming period will largely depend on how quickly supply-side conditions improve.
Source: Montel News
Analysis written by: Tóth Eszter Lilla
25.03.2026.