European Gas Prices Hit Multi-Week Highs on Hormuz Tensions, Low Storage

European natural gas prices climbed for a fourth straight session on Monday, hitting multi-week highs as escalating naval tensions in the Persian Gulf and severely depleted inventories fueled concerns of a potential supply crunch.

Geopolitical Risks Escalate

Traders are pricing in a significant geopolitical risk premium following warnings from Washington that it could enforce a naval blockade on Iranian ports if commercial shipping through the Strait of Hormuz remains restricted. The threat has intensified uncertainty for liquefied natural gas (LNG) shipments transiting the critical waterway.

The heightened tensions are delaying crucial spot cargoes, including those from major producer Qatar, destined for European import terminals. This bottleneck comes as European buyers already face stiff competition from Asian importers, who are actively bidding for available global LNG supplies to secure their own winter inventories.

Depleted Storage Amplifies Concerns

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Compounding the geopolitical pressures is the precarious state of the continent's gas reserves. According to data from Gas Infrastructure Europe, underground storage facilities across the European Union are currently at just 59% of capacity — a historic low for mid-August.

Injection rates have been severely constrained by a combination of factors, including high demand for gas-fired power generation during summer heatwaves and the aforementioned LNG import delays. The market structure is also a headwind, with the forward curve in deep backwardation — where spot prices are higher than futures prices. This removes the financial incentive for traders to buy expensive gas now only to store it for later use.

Market Reaction

Reflecting the supply fears, benchmark Dutch front-month futures rose 1.83% to €62.55 per megawatt-hour, the highest level since July 24. The equivalent UK wholesale contract gained over 2% to trade at 154.01 pence per therm, also a multi-week high. For both contracts, this marks the longest daily winning streak since late July.