Middle East Tensions Keep European Gas Prices Steady Despite Supply Recovery

European and British wholesale natural gas prices showed little movement on Monday, taking a breather after recent sharp gains. The benchmark contract dipped 0.2% to 74.50 euros per megawatt-hour (MWh), while the British contract fell 0.5% to 187.00 pence per therm. Traders are weighing the latest escalation in Middle East military conflicts against signs of partial supply recovery in the Persian Gulf.

Tensions rose over the weekend as Yemen's Saudi-backed government launched a major military campaign against Iran-backed Houthi forces. In response, Houthi forces targeted Saudi Aramco energy sites with missiles and drones, raising concerns about potential disruptions. However, the immediate impact on global energy markets was limited as Saudi Arabia partially restored operations on its East-West Pipeline and resumed tanker loadings from Yanbu.

Despite the current lull, energy analysts note that European natural gas prices have strong underlying support as winter approaches. Underground storage levels across the EU are about 12 percentage points below last year's levels, leaving the continent vulnerable to early cold snaps or transit issues. With strong competition from Asian buyers for liquefied natural gas (LNG), any further disruptions in Gulf transit routes could quickly drive up long-dated gas contract prices.