Specifically, unlike oil which Goldman calculated had already priced in substantial war risk premium, "European gas (TTF) and spot LNG (JKM) prices have embedded little-to-no risk premium until this past Friday" and so, the bank saw "significant upside risk to prices from a potential sustained disruption of LNG supply through the Strait of Hormuz. In a scenario where flows halt for one month, we think it is likely that TTF and JKM could approach 74 EUR/MWh ($25/mmBtu) -- 130% above current levels -- a threshold that triggered large natural gas demand responses during the 2022 European energy crisis."

Below we excerpt the key sections from the must read report (especially to European energy traders as we will discuss in a bit).

Q10. How much risk premium has been embedded in European gas prices?

Differently from oil, we believe that until this past Friday, European natural gas prices had embedded little-to-no risk premium associated with Iran-related geopolitical risks. Specifically, TTF has been pricing in the bottom half of our estimated hard-coal-to-gas (C2G) switching range for the past month, modestly below our 36 EUR/MWh March 2026 TTF forecast (Exhibit 11). Once accounting for the recent sell off in carbon emission prices to below the 80 EUR/t embedded in our TTF price forecast, worth 2.0-2.5 EUR/MWh in gas-equivalent terms, prompt gas prices are still largely in line with our view that TTF needs to be in this C2G switching range to help manage NW European gas storage to above 80% full by end-Oct26, given that current inventory levels remain well below average. That remains our view, and we maintain our 34 EUR/MWh balance-of-the-year TTF price forecast.

Q11. What are the risks to global gas prices from this weekend's developments in the Middle East?

We see significant upside risk to European gas and global LNG prices. The most significant impact to global gas markets would come from a potential disruption of the approximately 80 mtpa (302 mcm/d or 11 Bcf/d, 19% of global LNG supply) of LNG that typically flow through the Strait of Hormuz (Exhibit 2), which could potentially arise from an escalation of the ongoing conflict. 

Specifically, in a scenario where LNG flows through the Strait are fully halted for one month, we estimate a resulting tightening of NW European gas storage equivalent to 8% of capacity. Our fuel switching models suggest that European gas prices would need to maximize both switching into hard coal and into oil products by pricing at or above distillate fuel price levels for over three and a half months to offset it. At current oil prices this would imply TTF essentially doubling to 62 EUR/MWh[10] ($21/mmBtu). Given that oil prices would also likely rally in this scenario, it is likely that TTF could approach the 74 EUR/MWh ($25/mmBtu) threshold that triggered large natural gas demand responses during the 2022 European energy crisis.

A hypothetical longer disruption of natural gas supply transit through the Strait of Hormuz lasting more than two months would likely lift European natural gas prices above 100 EUR/MWh ($35/mmBtu) to trigger more significant global gas demand destruction given the increased difficulty for the market to fully offset such a tightening shock ahead of the next winter.