Goldman Sachs has cautioned that if liquefied natural gas (LNG) exports from the Gulf region fail to improve this winter, both the TTF benchmark for European gas and the JKM benchmark for Northeast Asian LNG could surge to EUR 105 per megawatt-hour and USD 35 per million British thermal units (mmBtu) respectively by year-end. These projections stand in stark contrast to the bank's baseline scenario of EUR 70 per MWh and approximately USD 25 per mmBtu, which assumes a gradual restoration of LNG shipping flows through the Strait of Hormuz.

At the time of writing, TTF natural gas futures were trading at EUR 77.8 per MWh, while JKM futures were quoted at USD 27.5 per mmBtu. Goldman's risk scenario forecasts for the two benchmarks represent increases of 35% and 27% above current levels respectively. Notably, the substantial spread between the bank's baseline and risk scenarios highlights just how heavily market prospects hinge on shipping activity through the Strait of Hormuz.

Iran maintains that it has closed the strait, while the US Central Command reported over the weekend that oil and LNG traffic through the waterway over the past two weeks reached its highest level in six months. The conflicting accounts from both sides keep the outlook for shipping flows highly uncertain. The natural gas market is effectively engaged in a genuine two-way bet on Hormuz shipping volumes, where any signs of improvement or stagnation in LNG loadings could rapidly drive swings in both benchmarks.

A steady recovery in Hormuz transit volumes would push prices toward the baseline scenario, whereas a halt in the recovery or the onset of a cold snap would increase upside price risks. Traders are expected to monitor LNG cargo data, any further attacks on Gulf energy infrastructure, and progress in regional negotiations over shipping routes. Goldman Sachs stated that gas prices this winter will be determined by LNG flows through the Strait of Hormuz, and if the supply recovery stalls, European and Asian prices could rise to levels that force industrial sectors to cut demand.

Beyond the pace of recovery in Gulf LNG flows, future gas price trajectories also depend on winter weather conditions, with the bank's price targets premised on average seasonal temperatures. Goldman anticipates that most of the resulting demand destruction will come from industrial users, given their significant consumption of natural gas. The bank noted that direct discussions with Indian industrial customers suggest USD 30 per mmBtu could serve as a critical threshold triggering further cuts in industrial gas demand.

On the supply chain front, the bank expects European LNG importers to largely pass on elevated LNG costs to downstream customers. Rising gas prices would support coal demand where substitution is feasible, thereby linking the gas market to broader energy demand dynamics. At the same time, this would feed through to European inflation, a development that warrants particular attention given that the European Central Bank is already deliberating whether to tighten policy further. Oil traders should also closely monitor the same shipping headlines, as the Strait of Hormuz represents a shared risk for both crude oil and LNG.