Europe Gas Prices Soar to Three-Year High Amid Strait of Hormuz Uncertainty

European natural gas prices have surged to their highest level in three years as traders rush to fill fuel storage facilities before winter. The benchmark futures rose by up to 3.4% on Tuesday, reaching €74.95 per megawatt-hour for the first time since January 2023.

The increase is attributed to traders' concerns about the Strait of Hormuz, a critical waterway that connects Europe to major gas suppliers in the Middle East and Asia. A proposed deal between Iran and Oman could provide a safe route for shipping through the strait, but its details remain unclear, leaving uncertainty among traders.

Europe's gas storage facilities are currently only 67% full, which is significantly lower than the seasonal norm of 83%. This has led analysts to warn that Europe's flexibility to absorb further supply or demand shocks is limited as it heads into winter. In Germany, home to the continent's largest storage facilities, sites are only around half full, raising concerns about their ability to meet national targets.

Rising gas prices have also had a knock-on effect on electricity costs, with gas-fired plants driving up power prices. German power futures for 2027 climbed as high as €126.62 per megawatt-hour, their highest since October 2023, according to EEX data.