To gauge the outlook for European inflation it helps to go underground: to the dozens of natural gas storage sites used to stock up on fuel during the summer for use in winter. Although the seasonal refill is going slowly, Europe is probably going to hoard enough of the commodity to avoid a 2022-style spike in gas and electricity prices, and thus avert any inflation scare.
Until five years ago, the seasonal refill was a routine process that attracted very little attention, even within the energy industry. Because demand for gas is low during the spring and summer, the fuel is cheapest then so that’s when utilities and traders buy it and store underground, for deployment when temperatures drop.
In 2021, Russia cut gas supplies to Europe ahead of its invasion of Ukraine. What followed was an emergency of epic proportions: The German government had to intervene to refill the gas sites, pushing the cost of the commodity to an all-time high of €345 ($400) per megawatt-hour in July 2022, up from pre-crisis levels of around €25 per MWh. The mighty price rally left the European Central Bank and the Bank of England facing a nightmare scenario as inflation soared above 10%. Across Europe, many governments had to intervene to bail out families and businesses facing ruin due to sky-high utility bills.
Now, the Iran war is again complicating the refill process as the closure of the Strait of Hormuz disrupts about a fifth of the world’s liquefied natural gas supply. With the memory of the 2021-2022 debacle still fresh, everyone, from central bankers in Frankfurt to equity traders in London, is nervously assessing the progress of storage replenishment.
The problem isn’t just current flows, but the starting point. Europe emerged from the 2025-2026 winter with its gas stocks depleted, down to a four-year low of just 27% of capacity. Since then, the refill process has gone as well as one could expect. Since April 1, Europe has added the equivalent of 145 terawatts-hour of gas to its stockpiles, less than the about 166 terawatts it added during the same period in 2025 but more than the 126 terawatts of 2024. But with the starting point so low, there’s lot of catching up to do. By June 1, storage sites were only 41% full, compared with a 10-year average of about 53%.
For now, European officials aren’t sounding the alarm. With regional gas prices hovering just under €50 per megawatt-hour, the continent is doing just about enough to attract LNG supply from the Americas and restrain industrial demand. Brussels believes that regional gas inventories could still refill to about 80% of capacitybefore the onset of the next winter, according to the EU Gas Coordination Group, a panel of industry experts from the European Commission and member countries.
But my back-of-the-envelope math suggests the target might prove too optimistic. Under current refill rates, my calculations show that Europe would only reach 70% of capacity by the end of the refill season in late October. If Hormuz reopens soon, more LNG supply would arrive before then, helping to top-up the underground reservoirs to a more comfortable level. If Europe manages to reach about 75% of capacity, it should be enough.
Thankfully, the gas market is in better shape than it was in 2021-2022, with a wave of new LNG facilities, particularly in America, boosting availability. China, the biggest importer of Qatari LNG, and a few other buyers in Asia can buffer any disruption much better than Europe did back then, in part by switching to coal from gas. China takes about 24% of all Qatari LNG exports; India, Pakistan and Bangladesh account for another 28% together. All have plenty of coal-fired capacity. Japan and South Korea are also switching as much as they can to coal, further freeing cargoes for European utilities to refill storage.
Europe produces more electricity from solar and wind now than it did four years ago, reducing the gas burnt. Nuclear production in France, which was limited in 2022 as dozens of reactors needed repairs, is helping. Hydropower is, too, contributing a lot this time, a sharp reversal from the drought four years ago.
Put it all together and, barring a resumption of the Iran war, the peak of European gas prices is already in the rearview mirror. Back in March, wholesale costs briefly rose to nearly €75 per megawatt-hour; Wall Street banks published forecasts warning that €100 per megawatt-hour was around the corner.
Since then, however, benchmark gas prices have hovered between €50 and €40. It helps that Germany has learned its lesson from 2022 when Berlin panicked, embarking on a gas-buying spree that created a self-fulfilling price spiral.
European governments should remain alert to the potential need for intervention to help fill inventories if Hormuz remains closed beyond July-August. But for now, they should just wait-and-see, and let the market do its job.