L’AGEFI – The surprising case of energy prices

Translation of an article published by L’AGEFI on 12 June 2026
By Michala Marcussen, Societe Generale group Chief Economist

Unlike in 2022, Europe was better prepared for the Gulf geopolitical shock on the energy front. Achieving strategic energy autonomy remains essential.

Back in early March, just after the onset of the current Middle East conflict, many institutions choose to produce alternative economic scenarios recognising the uncertainty on the duration and intensity of the conflict.

Yet the surprising feature of the current energy crisis is that prices are not higher, and this despite the duration of the conflict approaching that assumed in several adverse scenario. Looking back to the ECB’s March staff projections, the adverse scenario (with ongoing energy disruptions) forecast $119/b on Brent oil and €87/Mwh on TTF gas in 2Q26. The OECD’s interim projections in March explored a downside scenario with oil prices averaging $135/b and gas prices averaging €77/Mwh. So far in 2Q26 observed prices are trading well below these numbers averaging around $100/b on oil and €45/Mwh on gas.

These lower market prices may in part reflect the reduced intensity of the conflict compared to the initial weeks and discount market expectations on a peace deal that will see the Strait of Hormuz reopen but also capture other features. Alternative supply routes for the Middle East have worked smoothly, although still leaving a substantial shortfall of supply. Adjustments to the demand side have also played a role, most visibly with several airlines cutting back routes in response both to higher prices and fears of future supply shortages. Slower economic growth has further softened demand.

A significant part of the explanation for the surprisingly low energy prices is, however, found in preparedness. In the wake of Russia’s invasion of Ukraine in 2022, Europe in particular undertook a diversification of its energy supply, both in terms of the geographical origin of supply and across energy sources. Ongoing electrification provided a further impetus. A push for structurally higher inventories also played a role. While European gas supplies are indeed today at the low end of historical ranges, following a particularly cold winter, the situation would have been much worse had inventories not been well replenished at the outset of winter.

Europe is not alone in this preparedness. China provides a clear example. Its longstanding strategy of diversifying supply—across regions, transport routes and energy sources—has continued, alongside significant investment in storage capacity and long-term contracts. The United States has also played a central role, notably as a supplier of LNG, with the expansion of its export capacity providing a critical source of flexible supply.

Looking at energy investments globally, the latest World Energy Investment Report from the International Energy Agency (IEA) projects that global energy investments will reach $3.4 trillion in 2026, with $2.2 trillion expected to go to grids, storage, low emission fuels, nuclear, renewables, efficiency and electrification. It is striking to observe, however, that the remaining share invested into oil, gas and coal is set to fall to an estimated 35% in 2026 from just over 45% in 2015. While further acceleration is required, the trend is encouraging and the latest energy crisis will no doubt further focus attention on diversification, efficiency and autonomy of energy supply.

The IEA’s new Global EV Outlook also reflects how consumers are adapting, with a growing share of electrical vehicle sales. In the European Union, electrical cars accounted for 27% of new cars sold in 2025, up from 10% five years earlier. In China, those same numbers increased to 53% from 5%, while the United States has also seen gains, albeit less pronounced, to 10% from 2%.

Concerns about future surpluses

These ongoing shifts reflect an additional risk likely reflected in current oil prices, namely the prospect of returning to an even higher level of oversupply than that prevailing pre-crisis. This reflects not only shifts to demand, but also the fact that OPEC’s role has arguably been dampened by the departure of the United Arab Emirates in May.

Taken together, the current episode illustrates the value of diversification of both supply and demand, alongside higher inventories. This is no time for complacency, however. The longer the closure of the Strait of Hormuz lasts, the greater the risk of supply shortfalls. Should the conflict enter a more intense phase, further destruction of infrastructure would add to these risks. Europe, in particular, faces the challenge of rebuilding inventories ahead of winter.

The lesson from the current crisis is that diversification and inventories pay, but ensuring resilience to future shocks requires further investment. In a world shaped by greater geoeconomic fragmentation and geopolitical risk, striving for strategic energy autonomy is key. In the case of Europe, this implies continued investment in grids, storage, low emission fuels, nuclear, renewables, efficiency and electrification. This should also be seen as an opportunity for emission reduction and for building adaptation, ensuring that energy systems are resilient not only to geopolitical disruption, but also to increasingly visible extreme weather events.