Middle East conflict pushes European energy costs higher, markets see gradual relief by 2027

The renewed hostilities between Yemen's Houthi militants and Saudi Arabia have disrupted the pipeline that moves Saudi oil through the Red Sea, sending Brent crude to almost $110 a barrel and European TTF gas above €80 per megawatt hour. Although prices retreated modestly toward the end of the week, they are still roughly 70% higher for oil and 180% higher for gas compared with the start of 2026. The European Union has incurred substantial extra spending on imported fuels since the conflict began, as noted by European Commission President Ursula von der Leyen.

Partial reopening of the pipeline and rerouting of some Saudi exports through Oman have eased fears of a total supply halt, but reduced Gulf output and attacks on Russian infrastructure by Ukraine keep pressure on markets. LNG shipments from Qatar remain blocked because of the ongoing Strait of Hormuz bottleneck. Market forecasts anticipate Brent falling below $100 for December cargoes and gradually reaching about $90 by March 2027, with a more noticeable drop expected after July. For gas, TTF is expected to hold near current levels through March, then decline to roughly €60 in April and €50 by July, according to baseline scenarios.