European natural gas futures were up on Monday after Iran accused the US of making "unreasonable demands," as the two sides failed to reach an agreement yet again, over the weekend.
The front-month Dutch TTF contract rose 3.53% to 45.70 euros ($53.85) per megawatt-hour and the front-month UK NBP contract gained 3.89% to 112.32 British pence ($1.53) per therm.
On Monday, Esmaeil Baqaei, an Iranian Foreign Ministry spokesperson, said that the country's response to the US peace proposal was "reasonable and generous," while noting that Tehran only sought its legitimate rights, which were not "excessive," according to Iran's Tasnim News Agency.
That came after a post by US President Donald Trump on the Truth Social network on Sunday, in which he termed Tehran's response to the US-backed ceasefire proposal as "totally unacceptable," without providing more details.
Tehran's proposal reportedly focused on bringing an end to hostilities in the region first, before addressing other pressing concerns, according to the state news agency, Tasnim, on Sunday, citing an unnamed government official familiar with the matter.
Meanwhile, the Strait of Hormuz, which usually accounts for one-fifth of global LNG flows, remained effectively closed for the 11th week running, with just five vessels transiting over the past 24 hours, according to the Hormuz Strait Monitor.
Despite the latest diplomatic development, the rally in European gas prices has been limited, which, according to Daniel Hynes, a senior commodity strategist at ANZ, is due to both Qatar and the Abu Dhabi National Oil Company managing to get some supplies through the Strait after taking various precautions.
Hynes also noted that technical issues with Japan's Kansai Electric Power's Mihama No. 3 nuclear reactor could lead to increased reliance on LNG for electricity generation during a period of significant supply constraints.
All of this comes at a critical juncture for European markets, with refilling of inventories in full swing, but from depleted levels, at just 35.05% of capacity, compared to 42.16% during the corresponding period a year ago, according to Gas Infrastructure Europe.
According to geopolitical strategist Cyril Widdershoven, this war is "not temporary," but the markets have continued to price it under this assumption.
"The conflict has triggered the most significant restructuring of energy and maritime systems since World War 2," he said, while noting that all key stakeholders expect a quick return to normalcy following a diplomatic breakthrough in the region.
The Strait of Hormuz, which historically handled around 138 vessel transits per day, has seen traffic collapse into the single digits, he noted, warning that the disruption was unlikely to resolve itself and was instead "the beginning of a new maritime order."