European natural gas futures extended gains in after-hours trade on Wednesday, as renewed military escalation in the Middle East added fresh uncertainty to already fragile diplomatic efforts.
The Dutch TTF front-month contract rose 3.987% to 49.505 euros ($57.41) per megawatt-hour, while the UK NBP front-month contract gained 4.835% to 120.34 British pence ($1.61) per therm.
US forces intercepted multiple Iranian ballistic missiles and one-way attack drones and conducted self-defense strikes on Qeshm Island in response to Iranian attacks across the Middle East, US Central Command said in a late-Tuesday social media post.
It said Iran launched two missiles toward Kuwait and three at Bahrain, but none hit their targets either because they fell short, broke apart in flight, or were intercepted by US and Bahraini air defense forces.
CENTCOM also said it shot down three Iranian one-way attack drones targeting civilian vessels transiting the Strait of Hormuz and carried out "self-defense strikes" against an Iranian military ground control station on Qeshm Island.
Iran's actions come in response to continued Israeli attacks in Lebanon. Despite the escalation in hostilities and Iran's claims that negotiations were suspended, US officials maintain that talks with Tehran are still ongoing.
However, "The lack of meaningful progress toward a resolution has fueled concerns that disruptions to energy flows from the Persian Gulf could persist, raising fears over Europe's ability to replenish gas inventories ahead of winter," Trading Economics said.
Demand expectations for natural gas are also rising heading into summer. Atmospheric G2 said in a Wednesday social media post that it expects late June through July to bring hot, dry, sunny conditions across Europe, increasing stress on rivers and water systems. It added that any additional heatwaves could significantly lift electricity demand for cooling.
Gas Infrastructure Europe reported Tuesday that EU gas inventories were filled to just 40.76% of capacity, compared with nearly 50% a year earlier.
Daniel Hynes said stable but elevated LNG prices are likely to pressure European buyers as they struggle to rebuild storage levels while competing with Asian demand for cargoes. He added that supply conditions in Asia are set to tighten further as workers at Inpex Corporation's Ichthys LNG export project began strike action after talks with the union stalled. The facility accounts for roughly 2% of global LNG output, exporting about 9.3 million tonnes per year, Hynes said.