European gas prices hover above EUR 70/MWh amid geopolitical disruption, low storage and intensifying LNG competition. EU storage stands at 65%, well below 82% average, and may reach only 75% by November. Lost Qatari LNG is only partly offset, leaving Europe without a sufficient operational supply buffer. Europe–Asia LNG competition is set to intensify, keeping prices high and volatile. Low storage leaves Europe exposed to cold winter or unplanned US and Norwegian disruptions which could trigger shortages and renewed price spikes. Prices may ease to EUR 45-50/MWh in Q4 if Hormuz reopens; prolonged closure implies EUR 70-80/MWh.

Oil prices have rebounded after tensions escalated and flows through the Strait have declined. The price impact has been limited by alternative export routes, dark transits, ship-to-ship transfers and high US oil production but crucially also lower demand. Oil demand declined by 6.8 million barrels per day between end-2025 and June 2026, with China and Asia accounting for most of the fall. A near-term deal to reopen the Strait of Hormuz could temporarily lower oil prices, but the market is still expected to remain tight. Later in the year, recovering Asian demand, higher refinery activity and the need to rebuild low inventories are expected to support higher oil prices before a more sustainable decline next year. Because of a near-term deal some refinery capacity will likely come back online. But constrained refinery capacity, and higher demand for products will keep prices elevated.

FX options markets signalled renewed dollar strength. Markets viewed Warsh’s message as hawkish, raising the probability of a September Fed rate hike to over 65% and supporting the dollar. Dollar strength may prove temporary if the Fed keeps rates unchanged…and/or if higher US yields mainly reflect deficit concerns and a higher risk premium. No Fed rate hike and a possible Bank of Japan rate hike in September could support the yen.