Key facts
- European natural gas prices hit a four-month high.
- The Dutch TTF benchmark briefly exceeded €60 per megawatt-hour.
- Renewed violence around the Strait of Hormuz and Bab al-Mandab Strait triggered concerns.
- Prices are up 50 percent from the previous month.
- Analysts expect depleted European reserves and high Asian demand to squeeze supplies.
European natural gas prices surged to a four-month high as renewed violence around the Strait of Hormuz and the Bab al-Mandab Strait triggered concerns about the feasibility of transporting energy through these vital chokepoints. The benchmark European natural gas price, the Dutch TTF, briefly crossed €60 per megawatt-hour on Monday, its highest level since mid-March, settling at €59 per megawatt-hour on Tuesday. This represents a 50 percent increase from the previous month.
Traders are increasingly factoring in instability in the Middle East, particularly following the U.S. strikes against Iran and Tehran's retaliatory actions targeting regional allies and tankers. Before a ceasefire was struck in June, gas prices had consistently remained below €50 per megawatt-hour, with traders hesitant to make significant bets on a volatile conflict.
The current price spikes also reflect concerns that gas supplies will be further squeezed by depleted European reserves and high summer temperatures in Asia, which are expected to drive up demand for air conditioning. Analysts suggest that unrest in the Middle East is becoming a permanent feature of energy markets, especially with threats of tolls or "service fees" on maritime traffic and the Houthi group's embargo on the Bab al-Mandab Strait.
"The seemingly random nature of the continual opening and closing of the Strait of Hormuz means that this is no longer a reliable delivery route for the world’s LNG supplies," said Tobias Federico, a senior analyst at Montel Energy. Alice Acuña, Moeve EVP Trading & Commercial Integration, added, "The recent surge in TTF shows that geopolitical risk is becoming a structural reality for energy markets."