European Natural Gas Prices Climb as Red Sea Attacks Squeeze LNG Supply

European wholesale natural gas prices advanced on Thursday, with key benchmarks gaining about 1% amid persistent disruptions to global liquefied natural gas (LNG) shipments caused by attacks in the Middle East. The ongoing delays are heightening concerns about Europe's ability to secure adequate supply ahead of the winter heating season.

Geopolitical Risk Premium Persists

The Dutch TTF front-month contract, Europe's primary gas benchmark, rose 1% to trade near €63.15 per megawatt-hour (MWh), hovering close to its highest price point since late March, according to market data from Thursday. The equivalent wholesale gas contract in the United Kingdom posted a similar 1% gain, tracking the continental trend.

Market analysts attribute the sustained price strength to a geopolitical risk premium embedded in energy futures. The premium reflects ongoing attacks by Yemen's Iran-aligned Houthis on commercial shipping in key maritime corridors, which have severely hampered tanker traffic and delayed LNG exports from the Persian Gulf.

Storage and Demand Pressures

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The shipping bottlenecks are occurring at a critical time for Europe, which relies on seaborne LNG cargoes to replenish its underground storage facilities during the summer injection season. The supply friction has left regional gas inventories below seasonal norms.

Key supply-side factors include:

• Storage Levels: European gas storage is currently near 53% capacity.
• Seasonal Deficit: This is approximately 15 percentage points below the five-year average for this time of year.

Compounding the supply tightness, a heatwave across Southern and Central Europe has increased demand for gas-fired power generation to meet air conditioning needs. With European and Asian buyers competing for a limited pool of available LNG cargoes, traders expect prices to remain supported until maritime transit through the Middle East normalizes.