European Gas Prices Surge Amid Persian Gulf Diplomatic Stalemate
European gas prices rebounded strongly last week, with the British front-month contract gaining nearly 10% and its strongest five-day performance since July 20. The Dutch front-month futures also advanced towards a 9% weekly rise, reaching their highest intraday levels since July 24.
The price surge was driven by renewed concerns over winter supply reliability amid mounting security risks and diplomatic stalemate in the Persian Gulf. The collapse of talks between Washington and Tehran over navigation rights through the Strait of Hormuz has reduced liquefied natural gas shipments from Qatar to European regasification terminals, forcing utility buyers to turn to the spot market for substitute volumes.
EU underground gas storage sites were at 59% of working capacity in mid-August, an unprecedented low for this point in the season. This level is about 12 percentage points below where inventories stood at the same time last year and substantially under the typical five-year average. The shortfall leaves Europe more exposed to sharp price swings if colder-than-usual weather emerges early in autumn.
Market participants indicated that until liquefied natural gas tankers can transit the Strait of Hormuz without interruption and storage injections pick up meaningfully, European gas contracts are likely to retain a sizable geopolitical risk premium as the heating season approaches.