European Gas Prices Rise Nearly 3% as Middle East Tensions Reignite Supply Concerns

European and UK wholesale natural gas prices rebounded on Monday, ending a sharp downturn from the previous week, as traders priced in renewed geopolitical risk. Stalled negotiations in the Middle East and a corresponding spike in crude oil prices have revived fears of potential long-term disruptions to energy supplies for the continent.

Geopolitical Risk Returns

The benchmark Dutch TTF front-month gas contract climbed 2.8% to €74.10 per megawatt-hour, erasing some of Friday's losses. In the United Kingdom, the equivalent day-ahead wholesale contract saw a similar increase, rising 2.7% to 184.75 pence per therm.

The rally followed reports that diplomatic efforts to resolve a conflict in the Middle East had faltered over the weekend. According to the source, a proposal from Iran aimed at reopening the Strait of Hormuz was rejected by the United States. This breakdown sent Brent crude oil prices back above $106 per barrel, prompting energy traders to quickly reintroduce a risk premium into natural gas futures.

Reversal of Last Week's Trend

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Monday's price action marks a significant reversal from the previous week, when European gas futures fell by 8%, their worst weekly performance since mid-June. That decline was driven by a wave of profit-taking and market speculation that alternative shipping routes could be found to bypass key maritime chokepoints in the Persian Gulf.

Storage Levels Add to Winter Worries

Underlying supply fundamentals are adding to market sensitivity. According to data from Gas Infrastructure Europe, underground gas storage facilities in the European Union are currently filled to a level approximately 11 percentage points lower than at the same time last year.

With global liquefied natural gas (LNG) supplies already constrained by transit frictions and strong spot demand from Asia competing for flexible cargoes, the lower inventory levels leave Europe more vulnerable. A sudden cold snap heading into the winter heating season could rapidly deplete reserves and trigger further significant price increases.