As ongoing conflicts in the Middle East continue to disrupt supplies, some European natural gas traders have begun hedging against potential price spikes this winter. Data from recent options trading shows that benchmark European gas prices could surge to €100 per megawatt-hour during the next winter peak demand period, more than double current levels. These bets reflect traders' growing conviction that prolonged conflict could further hinder Europe's already sluggish efforts to replenish gas inventories before winter.

Since the outbreak of hostilities in late February, the Strait of Hormuz—a critical waterway for global energy supplies—has effectively been blocked, cutting off one-fifth of the world’s liquefied natural gas (LNG) supply and driving up prices. Although most Middle Eastern gas typically flows to Asia, the disruption has intensified competition for the world’s limited seaborne LNG resources.

Since the conflict began, the benchmark European gas price has risen by more than 40%, currently trading near €47 per megawatt-hour. While implied volatility—a measure derived from options pricing—has retreated from its peak in the first week of the conflict, it has still more than tripled since the start of the year.

At the same time, as traders increasingly seek protection against winter price increases, the skew for January call options rose by 4 percentage points over the past week. Currently, Europe’s extensive gas storage facilities are about 34% full, significantly below the five-year average of 45% for this time of year. Although it is normal for inventories to decline in winter and be replenished in summer, this year’s refilling process has started slowly.

Market data shows that over the past week, traders have executed call spread strategies for October through March with strike prices at €75 and €100, along with various risk reversal strategies—buying €75 and €100 call options while selling €42 and €35 put options.