European natural gas prices have climbed sharply after US President Donald Trump issued fresh, aggressive threats against Iran, dashing hopes for a de-escalation in the Middle East and reigniting worries about energy supplies from the region.
The benchmark European gas futures contract jumped as much as 5.7%. This follows two consecutive days of price declines, which were driven by a period of relative calm in the Middle Eastern conflict over the preceding weeks.
In an interview with Fox News, Trump stated that the US would deliver a "heavy blow" to Iran in retaliation for an attack on a military base in Jordan. Earlier, the US and Saudi Arabia also struck Iranian-backed militant groups inside Iraq, further escalating the risk of the conflict opening a new front and expanding.
The latest developments have once again raised market fears that shipping through the Strait of Hormuz, a vital global energy chokepoint, will not return to normal anytime soon. Just earlier this week, markets had been buoyed by renewed optimism over diplomatic efforts to end the war, a conflict that has already disrupted roughly one-fifth of the world's liquefied natural gas (LNG) supply.
A prolonged supply disruption is particularly concerning for Europe, as it makes it more difficult to replenish significantly depleted gas storage levels before the winter season. This situation also means Europe will have to compete more aggressively with Asian buyers for spot LNG cargoes.
As of 2:48 PM in Amsterdam, the Dutch front-month futures contract, the European benchmark, was trading 4.9% higher at €60.56 per megawatt-hour.
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