Middle East Conflict Sparks Global Energy Market Volatility

The ongoing conflict in the Middle East is having far-reaching consequences for global energy markets. The Strait of Hormuz, through which much of the world's oil and gas flows, has become a critical chokepoint. Qatar, one of the largest liquefied natural gas (LNG) exporters, has been forced to extend its force majeure on deliveries to European and Asian customers.

This disruption is pushing buyers to think beyond spot purchases. Importers in Europe and Asia are looking for supply that does not depend on the Middle East, including LNG from the United States and Australia. Japan's JERA, for example, has diversified its portfolio across several countries, while South Korea has secured long-term agreements with the US.

Europe's storage problem leaves little room for mistakes. Normally, Europe builds up a substantial cushion of gas before heating demand rises in autumn. However, this year, storage is starting September at around 65%, and European gas prices have risen to €75/MWh, their highest level in more than three years.

The consequences are already being felt beyond the energy sector. Higher gas prices raise electricity and heating costs, increasing expenses for energy-intensive industries and making it harder for Europe to bring inflation down.