European natural gas prices pulled back from a four-year high as traders assessed the US government's next steps in the Iran conflict and the potential impact on Middle Eastern supply sources.
Benchmark futures fell as much as 3.6% after breaching 100 euros per megawatt-hour in the previous session, a level last touched during Europe's energy crisis in late 2022.
US Vice President JD Vance is engaging with key hardline figures in Iran to restart peace talks, while President Donald Trump has signaled that hostilities could resume after the midterm elections.
The latest developments pushed oil prices lower, with some traders opting to lock in profits; technical indicators suggest futures are overbought, limiting upside room.
Multiple factors continue to underpin gas prices, which remain close to triple year-ago levels: tight global supply, low regional storage inventories, and colder weather that has Europe and Asia competing for LNG cargoes.
In addition, news related to the Iran conflict has strongly disrupted futures prices, especially ahead of the US midterm elections, with traders looking forward to greater clarity on Washington's policy direction once the vote is settled.
The Middle East accounted for roughly one-fifth of global LNG exports last year, and shipments are still being disrupted by the conflict.
Any signal that eases tension around LNG transportation through the Strait of Hormuz could weigh on prices.
Although some countries recently added modest volumes to storage, Europe's gas storage filling rate currently stands at just 75%, below the five-year seasonal average of 90%; Germany, Europe's largest economy, is only 62% full.
Forecasts indicate a cold snap across most of the continent next week, with heating demand above the seasonal norm, adding pressure to the market.
Patricio Alvarez, a senior analyst at Bloomberg Intelligence, said in a research note on Thursday that, as analyzed, if German temperatures are low and wind power weakens, pushing up heating gas demand while reducing wind power output, the market will face the risk of another surge.
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