European Natural Gas Prices Pause Amid Middle East Tensions

European and British wholesale natural gas prices saw a period of calm on Monday, taking a breather after weeks of significant gains. Traders are evaluating the impact of escalating Middle East military conflicts against signs of recovering supply in the Persian Gulf. The benchmark price dropped 0.2% to 74.50 euros per megawatt-hour (MWh), while the British price fell 0.5% to 187.00 pence per therm.

Geopolitical tensions remain high as Yemen’s Saudi-backed government launched a major military campaign against Houthi forces. In response, Houthi forces targeted Saudi Aramco energy sites with missiles and drones, raising concerns about potential disruptions. However, the immediate effects on global energy markets were limited by reports that Saudi Arabia has partially restored operations on its East-West Pipeline and resumed tanker loadings from Yanbu.

As Europe enters the peak winter heating season, natural gas curves maintain a strong structural floor. Underground storage levels in the European Union are about 12 percentage points below those of last year, leaving the continent vulnerable to early cold snaps or transit issues. Analysts at Bank of America noted that higher energy prices driven by the Middle East crisis are contributing to inflation and higher interest rates, which are slowing growth. However, BofA does not anticipate a major energy-led recession, citing insufficiently high energy prices and interest rates to suppress demand.