Middle East Conflict Drives Gas Prices Up; Algeria's Role in European Supply in Focus
Takeaway
The 50% year-on-year increase in Algerian LNG to Spain reflects a structural shift in Mediterranean energy flows, not a seasonal spike. European utilities and LNG traders should monitor Medlink and the Southern Hydrogen Corridor. Algeria's growing commitment to Spanish volumes may tighten spot supply for other Mediterranean buyers.
Tensions in the Middle East escalated sharply on March 1, 2026, following reported attacks by the U.S. and Israel against Iran, and Iranian retaliation against Qatar and other regional targets. The Iranian Revolutionary Guard claimed control of the Strait of Hormuz, a vital artery for global oil and gas shipments. United Nations Secretary-General Antonio Guterres expressed grave concerns about the escalating conflict and its impact on civilians and regional stability. The International Energy Agency (IEA) estimates that 20 million barrels a day transit the Strait of Hormuz.
Algeria's role as a key gas supplier to Europe gains importance amid the Middle East crisis. In November 2024, Algeria became the top natural gas exporter to Spain, providing nearly 50% of Spain's total natural gas imports. Of this, 9.971 GWh were delivered via the Medgaz pipeline and 3.723 GWh as LNG. However, in August 2025, Algeria's LNG exports dropped to 0.8 million tonnes, a decline from over one million tonnes the previous year. The Maghreb-Europe (MEG) pipeline, which experienced disruptions in 2021 due to political tensions, resumed operations in 2022, with Spain exporting gas to Morocco.
Experts at the Organization of Arab Petroleum Exporting Countries (OAPEC) warned of significant repercussions for the LNG market due to the military escalation in the Gulf, anticipating unprecedented price increases. Goldman Sachs Research estimates that a one-month halt of LNG flows through the Strait of Hormuz, which sees approximately 80 million tons per annum (19% of global LNG supply), could push Dutch natural gas prices (TTF) to nearly 74 EUR/MWh. Disruption to traffic in the Strait of Hormuz has already slowed shipping activity.
If the Strait of Hormuz remains closed, Iraq and Kuwait could face oil production cuts, potentially reducing supplies by 3.3 million barrels per day by the eighth day of the conflict, according to JP Morgan analysts. QatarEnergy halted LNG production after attacks on its facilities in Ras Laffan and Mesaieed. The Dutch day-ahead gas contract, the European benchmark, jumped 41% to €45 per megawatt hour (MWh) on March 2, 2026, from €32 on Friday. Brent crude rose as much as 13% to $82.37 a barrel before settling around $78.
Market analysts are closely monitoring the duration of the Strait of Hormuz closure, with some predicting oil prices could surpass $100 per barrel if disruptions persist. Wood Mackenzie analysts noted that the loss of approximately 1.5 Mt (2.2 bcm) a week of LNG exports through the Strait of Hormuz would force Asian and European markets to draw more heavily on existing storage. The OPEC+ group agreed on March 1, 2026, to increase output by 206,000 barrels per day in April.