European Gas Prices Hit Four-Year High After Houthi Attacks on Saudi Energy Hubs

European wholesale natural gas prices climbed to their highest point in approximately four years on Wednesday, driven by escalating geopolitical tensions in the Middle East. The rally followed reports of new missile and drone strikes by Yemen’s Houthi movement against critical Saudi Arabian energy infrastructure, stoking fears of wider supply disruptions as the Northern Hemisphere heads into its peak heating season.

Geopolitical Risk Escalates

The price surge was a direct reaction to attacks on Saudi Arabia's energy sector. The Houthi movement announced on Tuesday it had targeted the kingdom's Ras Tanura oil refinery and export terminal, its largest such facility. This followed other recent attacks on pumping stations along Saudi Arabia’s vital East-West Crude Oil Pipeline.

These strikes threaten a key artery of global energy supply and undermine recent diplomatic efforts aimed at de-escalation in the region. For energy markets, the targeting of the 1,200-kilometer East-West pipeline is particularly concerning, as it represents a primary route for bypassing the heavily contested Strait of Hormuz, highlighting the vulnerability of global supply chains.

Market Reaction and Supply Chains

Reflecting the increased supply risk, key European gas benchmarks saw significant gains. The front-month Dutch TTF contract, a benchmark for continental Europe, rose 1.2% to 97.35 euros per megawatt-hour (MWh), its highest level in about four years. In the U.K., the equivalent NBP futures contract gained 1.5% to 241.00 pence per therm.

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The persistent threat to Middle Eastern energy infrastructure has already disrupted seaborne Liquefied Natural Gas (LNG) trade. With LNG carriers forced to take longer routes, such as circumnavigating Africa, transit times have increased and pushed up freight costs. This has contributed to spot LNG deliveries to European terminals falling by nearly 80% compared to the same period last year, according to market data.

Europe's Fragile Inventory Position

The supply-side shocks are compounding an already precarious situation in Europe, where natural gas storage levels are exceptionally low heading into winter. According to data from Gas Infrastructure Europe (GIE), regional inventories are severely depleted:

• EU underground storage is currently at approximately 74.6% of capacity.
• This marks the lowest level for late October in records dating back to 2009.
• It lags significantly behind the five-year historical average of 86% and the 95% levels seen at this time last year.

With meteorologists forecasting an early start to colder-than-average temperatures across Northern and Central Europe, utilities may be forced to begin drawing from these already-low inventories sooner than anticipated, placing further upward pressure on prices.