European and British wholesale natural gas prices rose 2% on Monday, nearing their highest levels since late 2023, after Iran threatened to declare a restricted zone near the Strait of Hormuz. The move follows weekend U.S. strikes on Iranian tankers and comes as European storage lags the five-year average by 17 percentage points.
European and British wholesale natural gas prices rose 2% on Monday, hovering near their highest levels since late 2023. The advance comes as an escalating military standoff in the Persian Gulf and persistent storage deficits keep energy desks braced for supply disruptions ahead of winter.
The benchmark Dutch front-month contract gained 2% to trade near 73.80 euros per megawatt-hour, just below its multi-year peak of 74.32 euros reached last week. In Great Britain, the equivalent NBP wholesale gas contract also advanced 2% to trade around 182.50 pence per therm, within striking distance of its 2023 high of 183.95 pence. Traders are re-evaluating winter supply security following fresh strikes and shipping threats along Middle Eastern energy corridors.
Tehran threatens Hormuz restricted zone after U.S. strikes
Market sentiment turned acute after Iranian authorities announced plans to declare a restricted zone outside the Strait of Hormuz in the coming days. The warning followed weekend military engagements in which U.S. forces struck and disabled three Iranian oil tankers, responding to an Islamic Revolutionary Guard Corps ballistic missile attack that targeted two U.S. Navy warships in the region.
Because the Strait of Hormuz handles roughly one-fifth of global LNG traffic, chiefly from Qatar, the prospect of formal transit restrictions or continued military skirmishes threatens to choke off a vital supply artery to Europe. As a result, European utilities are bidding aggressively against Asian buyers for uncommitted Atlantic basin LNG cargoes to fill the potential gap.
Storage deficits deepen winter vulnerability
The geopolitical shock lands as European energy infrastructure struggles with a severe shortfall in underground gas reserves entering the final weeks of the summer injection season. Data from Gas Infrastructure Europe shows regional storage facilities filled to approximately 62% of capacity, trailing the five-year seasonal average by roughly 17 percentage points. Intense summer heatwaves across Southern Europe boosted gas-fired power generation, while routine offshore pipeline maintenance in Norway and delayed Qatari LNG cargoes restricted storage injection rates throughout August.
Trading desks warn that with storage replenishment running behind schedule, any sustained disruption to seaborne LNG flows through autumn would leave the continent exposed to price spikes and potential supply rationing during extended winter cold snaps.
Energy surge feeds hawkish ECB rate bets
The persistent surge in wholesale natural gas, coupled with Brent crude holding firm past $90 a barrel, continues to stoke cost-push inflation fears across European industrial and retail sectors. Surging energy input costs complicate the policy landscape for the European Central Bank as its Governing Council prepares to meet on Thursday.
With headline Eurozone CPI accelerating to 3.3% in August, driven primarily by a 14.3% jump in energy components, money markets have almost fully priced in a 25-basis-point rate hike from President Christine Lagarde and policymakers this week. That leaves broader European financial conditions tightly constrained heading into winter.
Source: Investing.com
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