Trump's Threats of Expanded Iran Strikes Drive European Natural Gas Prices Higher

European natural gas prices have risen for a third consecutive session following former President Trump's declaration of new strikes against Iran, which came after the US reimposed a shipping blockade on Iran in the Strait of Hormuz.

The benchmark gas contract surged by as much as 3.1%, solidifying its position within the high price range seen since late March. With Middle Eastern conflicts intensifying, the market has largely abandoned expectations for a swift restoration of normal energy export flows from the region.

On Tuesday, US forces completed a new round of airstrikes against Iran, targeting dozens of military sites around the Strait of Hormuz while reinstating a maritime blockade to control all vessels traveling to and from Iranian ports and coastal areas. In a Fox News interview, Trump stated that if Iran refuses to return to negotiations, the US will strike Iranian power plants and bridge infrastructure next week.

Prior to the outbreak of this geopolitical conflict, the natural gas market had anticipated a surge in LNG exports from the Persian Gulf, which previously accounted for roughly one-fifth of global liquefied natural gas supply. Now, with ongoing disruptions to energy transport, Europe and Asia are competing for limited seaborne LNG cargoes, hampering Europe's plans to build winter reserves. This competition is further intensified by heatwaves driving up global energy consumption.

On Tuesday, following strong dissuasion from US allies in the Gulf region, Trump shelved a plan to impose a 20% transit fee on cargo passing through the Strait of Hormuz. However, the outlook for this critical waterway remains fraught with uncertainty, keeping the market on high alert.

Energy consultancy Inspired Plc noted in a report this week: "Continued US-Iran exchanges of fire and successive attacks on Gulf energy infrastructure are persistently elevating the geopolitical risk premium for natural gas."

At the time of writing, the European benchmark, the Dutch front-month natural gas contract, was up 2% at €54.01 per megawatt-hour.