Dutch TTF gas and Brent crude oil are two of the world’s most liquid energy markets.
Deep liquidity allows for trusted price benchmark creation that, alongside a wealth of market data, reveals a picture over time of supply security, of fundamental risks – and of potential opportunities.
Maritime traffic through the Hormuz Strait is expected to gradually return to normal over coming months after the US and Iran agreed a provisional peace deal.
Against this backdrop, ICIS market experts have analyzed the data we specialize in producing – robust price assessments and explainable price forecasts – and applied their deep understanding of the fundamentals underpinning crude oil and the TTF, to transform this data into actionable intelligence.
THE SHOCK TO THE SYSTEM
No matter how liquid, and regardless of the depth of participation, commodity markets will react to the vagaries of supply and demand. It is what a well-designed market should do.
Signals generated by a healthy, functioning market act as a red flag for risks and warn against the potential for physical market failings. And this is what the world has witnessed over the past four months since the US-Israeli invasion of Iran on 28 February 2026 and consequent closure of the Hormuz Strait.
Around 20%-25% of the world’s traded oil, and 25% of global LNG trade, moves through the Strait of Hormuz.
Its sudden closure shocked global gas and crude oil markets and increased volatility in both as risk-averse participants scrambled to mitigate potential losses amid the sharp price moves or – in some of the more risk-inclined cases – to take advantage of them.
FRAGILE PEACE
The recent signing of an interim – albeit fragile – peace deal between the US and Iran is expected to reopen the Strait toll-free for 60 days while further negotiations take place.
Yet energy markets will remain vulnerable to further risks as supply chains ramp back up and global regions seek to recover.
In European gas and LNG markets, the upside risk is two-pronged: Growing demand for storage injection volumes for delivery in the third quarter of this year is becoming more apparent by the day. And upwards pressure on European gas prices would be exacerbated if increased LNG cargo buying emerges in Asia amid any El Nino-driven heatwave.
In crude oil, demand to replace strategic volumes following releases from storage over the past four months will be balanced out by poor downstream demand for oil products. There will be at best a gradual return of Middle Eastern crude to the market amid infrastructure damage and shipping safety concerns.
But what does all this mean for global oil and gas trade – and the relative balance of risks across both markets – for the remainder of this year? And what can participants do to position themselves to thrive in an uncertain environment?
HORMUZ CLOSURE – THE UNDERLYING IMPACT
While past performance is never a guarantee of future results, assumptions can be drawn from the relative movements of Brent and the ICIS TTF that feed into an informed view of future probabilities.
ICIS analysis shows that volatility in both Brent and TTF rose after the US-Iran conflict escalated on 2 March, with TTF becoming more volatile than Brent. ICIS data also shows TTF moved more closely in line with oil, as traders temporarily priced both markets against the same geopolitical risk premium.
Pre-crisis, TTF daily realized volatility was 3.2%.
During the crisis window, it rose to 7% – a material increase in day-to-day price instability. Brent volatility also rose sharply, from 1.8% to 4.4%.
Both markets reacted to the geopolitical backdrop, with TTF responding through LNG supply risk and shipping security assumptions and Brent through direct crude shipping disruption, both associated with the Hormuz closure.
When asked about TTF’s relative volatility to Brent, one trader said they saw oil as less exposed to Hormuz disruption than gas.
Crude is “a more diversified market”, they said, considering factors including availability of spare capacity.
This difference in maturity can explain the less pronounced moves on Brent. The oil market is globally arbitraged, is more fungible than European gas and has greater depth of liquidity. This is why TTF tends to show a stronger response to supply stress.
Another European gas trader suggested algorithmic news trading had influenced European gas and described oil traders as “more mature in reacting to headlines”.
TTF MORE REACTIVE
Key to understanding the relative volatility is the regression beta, which rose from 0.78 before the crisis to 1.11 during the crisis window. This means that, before the crisis, a 1% move on Brent was associated with an average 0.78% move on TTF. But during the crisis window, a 1% Brent move was associated with an average 1.11% move in TTF.
With TTF prone to larger day-by-day price moves in a volatile crisis scenario, market participants could benefit if positioned on the right side of the Brent-TTF spread. And this could apply in the relative short-term, to take advantage of the more reactive TTF, or over a longer-period backed by the emerging fundamental outlook with more upside risk on gas, as discussed below.
Going forwards, TTF could remain more closely correlated with Brent as the same geopolitical risks persist relating to the stability and reliability of energy flows through the Strait of Hormuz.
And more sensitive in terms of price reactiveness.
TTF: STORAGE DEFICIT AND ASIAN COMPETITION
The relative balance of risk is becoming more bullish for TTF than for Brent.
Europe will need to secure more LNG cargoes to refill its gas storage sites ahead of the coming winter.
Europe’s natural gas stocks were just 46% full at the start of week 26 – the lowest since 2021 and a full 10 percentage points down from 2025, according to ICIS Gas Foresight, covering Western and Central Europe.
EU storage policy means the reserves must be at least 80% full anytime between 1 October and 1 December this year.
Bit if sluggish net injection rates, which have kept stocks at multi-year lows, continue at the same pace seen between mid-May and mid-June, European storage would be just 70% full at around 80bcm by the start of November, 10-25bcm lower than in other years.
To hit the higher storage levels seen in past years, Europe would need to secure around 150 LNG cargoes, each carrying 100 mcm, or about 33 additional LNG cargoes per month – more than one a day – through to November.
This leaves the 80% requirement reliant on a sharp summer acceleration and sustained access to flexible LNG.
The ICIS LNG Reliance Ratio estimates the share of required storage injections that must be supplied by LNG after accounting for forecasts of pipeline imports, domestic production and domestic gas demand.
A ratio of 1 means all required injections depend on LNG, while a ratio above 1 indicates that LNG is also needed to cover part of underlying consumption.
When calculated in May, the forward ratio for September was 1.38. When recalculated in June, the September ratio had risen to 1.62, while the intervening months also moved higher to sit above 0.90.
The increasing reliance ratio as we head further into summer reflects the steady escalation of the deficit – and the growing need for a supply-side response. This leaves Europe more exposed to global LNG market dynamics during the final phase of the refill season.
The most recent calculation showed the risk across June-September is concentrated in September, mirroring the pattern of the previous month.
LNG SUPPLY
According to ICIS LNG Foresight data, the summer supply risk is acute across June-July, with the global LNG market 1.6 million tonnes short during this period.
A tighter market would make it harder for Europe to attract flexible LNG cargoes and replenish gas stocks quickly unless it outbid other buyers, exposing European gas prices to upside risk in the third quarter.
Increased price volatility at elevated levels could then emerge if further supply shocks surface, such as prolonged Qatari LNG cuts or export facility outages. Additional upside could materialize if Europe remains slow to inject gas into storage, or if Asian LNG demand strengthens in the second half of the year.
An expected surplus in the third quarter could offer some respite to European buyers later in the summer if we see stable flows through the Strait of Hormuz. But relying on later-season injections would be inherently uncertain, particularly when risk associated with the El Nino weather system is layered on top.
TUG-OF-WAR
Europe looks certain to find itself in a tug-of-war with Asia for spot LNG vessels. And US supply is key.
Europe needs more than one LNG cargo to reach its ports instead of an Asian port every day for the rest of summer which requires netback prices – the market price minus costs – for US cargoes to change.
While it costs at least $1 per million British thermal units (MMBtu) more to send a US cargo to Asia than to Europe depending on destination, the Asian spot price has recently been around $2/MMBtu higher, making it more profitable to send US LNG to Asia.
If Europe cut the spread to Asia to a dollar or less, the extra shipping cost would outweigh the benefit of the higher Asian price and cargoes would be pulled back to Europe.
But the El Nino weather system is a wildcard that could present a challenge.
The World Meteorological Organization on 2 June reported there was a 90%, or near-certain chance, of El Nino conditions developing this summer. It could even be a strong example of the phenomenon, leading some reports to dub it a “Godzilla” El Nino.
The El Nino system is a warming of ocean currents in the eastern Pacific and is associated with higher temperatures in Asia over summer, which would significantly raise power demand through air conditioning in countries such as Japan and South Korea.
Although the US-Iran deal has – at the time of writing – seen the slow resumption of limited LNG flows from the Gulf through the Hormuz Strait, Europe could come back into the market seeking to step up its LNG purchases for storage injection at the same time as the richer Asian nations are looking to buy more for fuel for their own, equally urgent, cooling needs.
Analyst forecasts indicate the ICIS East Asian Index (EAX), which prices the Asian spot LNG market, will retain a premium to the ICIS TTF month-ahead product in July and August that keeps US LNG flowing to Asia. However, when the spread narrows, there may be opportunities for Asian buyers to offer volumes back into Europe.
BRENT: RESTOCK VS RETURN OF BARRELS
The upside risk is not exclusive to European gas. The global crude market too could be underpinned by bullish drivers linked to storage stocks. Although the risk remains tipped predominantly to the downside.
Even once the Strait of Hormuz opens, crude flows will take several months to normalize. Freight rates will remain elevated due to limited vessel availability and concerns over the safety of shipping lanes. Damaged infrastructure in the Middle East will slow the return of Arab Gulf barrels to the market.
Despite the peace deal between the US and Iran, the oil market will remain in “wait and see” mode until sustained, stable flows from the Gulf mitigate the risk premium, ICIS analyst Ajay Parmar said. “These markets will not return to full normality until early next year,” Parmar, added.
ICIS price forecasts put oil above pre-conflict levels until the end of 2027.
Gulf producers were forced to shut in capacity as storage reached maximum levels due to the Hormuz closure. According to the US Energy Information Administration, Middle East crude production was 11.25 million /day lower in May than February’s 25.2 million /day. Returning production to nameplate capacity could take months, depending on the damage incurred at these sites.
Reduced production led to significant draws from global oil inventories, with OECD oil inventories now at a multi-decade low.
The combined loss of supply from production and inventories has contributed to over 1 billion barrels of oil removed from the market over May-June 2026.
Looking ahead, restocking activities will drive increased demand for crude oil for the remainder of this year. Three waves of inventory rebuilding could support demand simultaneously: China restocking its strategic reserves, OECD governments refilling emergency stocks, and refiners rebuilding operational inventory.
Estimates suggest China had around 1.4 billion barrels in strategic reserves at the end of 2025, inclusive of those held at refineries, and could have since drawn over 30 million barrels.
Parmar noted: “China remains a wildcard when it comes to oil markets. Chinese buying in the second half of 2025 provided significant support to oil prices. During the US-Iran conflict, China saw its crude purchases fall by almost a third. If it returns to the market in a significant way soon, this will support oil prices considerably.”
However, many countries have seen demand destruction taking place over the course of the Hormuz crisis. Many flights were cancelled over the summer in Europe, the Middle East and Asia, and high gasoline prices led to a tepid start to the summer driving season.
Non-OPEC+ supply will also remain strong this year, with the International Energy Agency forecasting the groups production to grow by 1.7 million /day year on year in 2026, 440,000 /day higher than its expectation at the start of the year. These factors will dampen the potential upside risk.
While ICIS expects oil prices to remain elevated in the coming months, with so many potential upside and downside risk factors, oil prices could well move in either direction in the very near term. Geopolitical risk will only compound those fundamental swing factors.
With unreliable actors on all sides in this conflict, one thing is certain; market volatility is here to stay, and widespread uncertainty will present itself into opportunities for trading profits.
TTF-BRENT SPREAD
The spread between oil and gas spot prices could remain wide if the Strait of Hormuz opens and stable vessel transit resumes.
The largest share of LNG is still sold linked to the price of oil, particularly in Asian markets, where higher Brent prices are now filtering through to lagged LNG contracts.
With the price spread between oil-linked LNG supply and LNG bought on the spot market already too close to call, opportunities for LNG spread trades on the physical market in the immediate future look limited.
But spot gas prices still hold a premium to oil-linked LNG and this should continue based on firmer third-quarter gas demand.
A period of lower demand and bullish TTF prices could support some arbitrage sales by Asian buyers into European markets.
But this trade recently became less viable on falling TTF prices.
But the relative outlook across both markets could see opportunities emerging going into the start of winter.
ICIS analysts forecast a 8.4% Brent crude price decline from July-Oct, and a less pronounced 3.9% drop on the ICIS TTF.
And some in the market agree: “If oil prices fall over summer, [spread trade] could become more interesting early in the fourth quarter,” one trader said.
European LNG imports are largely priced off regional gas hubs, while oil-linked supply is more relevant for Asian buyers.
Qatar accounts for the largest volume of oil-linked LNG sales globally.
These volumes flow predominantly to Asian countries like China, India, South Korea, Japan, Taiwan, Pakistan and Bangladesh.
One trader said that oil-linked LNG volumes available for spot diversion could well remain squeezed in practice, even where volumes appear available on paper. “You’ve got to ask how much demand there is and who is buying,” they added.
Although opportunities could emerge from more flexible destination suppliers as well, like Oman, the UAE and others, not all LNG traders are likely to be in a place to take advantage of oil-gas spreads in the physical market. “They might hedge on paper instead,” said another source.
THE LONG OR THE SHORT OF IT? As ICIS analysis shows, under febrile market conditions, the TTF will show a relatively greater price reaction than Brent crude, due in part to market maturity coupled with oil’s global fungibility and depth of liquidity.
Pair this with the greater fundamental upside risk apparent in European gas as we move into the mid-summer months, and the opportunity to take a position on the spread between two of the world’s most liquid energy markets is hard to ignore.
Market participants may choose to take a long position on gas and a short position on oil. This is because:
European gas storage is materially below normal
The storage refill requirement is time-sensitive
Europe needs flexible LNG cargoes during Q3
Asia may outbid Europe for LNG if El Nino strengthens
TTF has already shown greater reactivity to shared geopolitical risk
Brent upside is partly capped by demand destruction and non-OPEC supply growth
Yet one thing that is certain in volatile energy markets is that nothing is certain.
Strong demand for oil as both OECD nations and refiners refill inventories and delays to the return of Middle East production could offset any emerging bearish oil drivers.
If both the TTF and Brent are vulnerable to potential upside, a spread trade could reduce macro risk with cross-commodity spreads usually more stable than outright futures prices.
A final factor is that market participants may choose to wait until TTF and Brent are less correlated – as was the case prior to the Hormuz closure – to maximize profit. Source: ICIS
