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EMEA Natural Gas Update: Futures Rally After US-Iran Resume Conflict, Europe's Storage Woes Mount

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European natural gas futures rose on Wednesday after the US and Iran resumed military strikes, shattering a temporary lull in hostilities earlier this week.

The front-month Dutch TTF contract was up 6.08% to 61.220 euros ($69.70) per megawatt-hour, while the front-month UK NBP contract rose 5.83% to 148.480 British pence ($1.97) per therm.

The US Central Command said in a post on X Wednesday that Iran's Islamic Revolutionary Guard Corps launched multiple missile attacks "in an attempted surprise attack on US forces" located across the Middle East. US Centcom noted that all missiles were successfully intercepted.

The US, along with the Saudi Arabian Armed Forces, has since launched strikes against Iran-aligned militants located in Iraq, targeting "multiple terrorist logistics and weapons sites."

Meanwhile, traffic through the Strait of Hormuz, which accounted for one-fifth of global LNG flows, witnessed an uptick on Tuesday, at 19 vessels, according to ShipFinder.

While supplies remain constrained, China's LNG demand is set to climb for the third-straight month, with the country's inventories being heavily depleted, according to Daniel Hynes, a senior commodity strategist at ANZ.

All of these factors are weighing on Europe's ability to refill its own inventories ahead of winter, as it competes with Asian buyers for limited supplies. Inventories in the region stood at 55.91%, compared to 67.28% during the corresponding period a year ago, according to Gas Infrastructure Europe.

Inventories were also significantly below the five-year average for this period, at 71.8%, according to the Swiss Federal Office of Energy.

Cyril Widdershoven, a geopolitical strategist at Blue Water Strategy, warned that "Asia is again pulling LNG away from Europe," while adding that European utilities must raise TTF bids significantly for traders to redirect supplies from Asia.

To make matters worse, the region is bracing for another unprecedented heatwave, across Central, Western and Mediterranean Europe, with temperatures expected to soar past 40 degrees Celsius, and even 45 degrees in certain regions, according to Severe-Weather EU.

The resulting increase in air conditioning will add to gas usage to meet the increase in power demand.

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