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EMEA Natural Gas Update: Futures Surge Amid Renewed US-Iran Hostilities, Commercial Vessel Attacks

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European natural gas futures continued to surge on Wednesday amid the resurgence in hostilities between the US and Iran, along with attacks against commercial vessels transiting the Strait of Hormuz.

Front-month Dutch TTF contracts rose 1.47% to 73.280 euros ($84.93) per megawatt hour, while UK NBP futures climbed 1.76% to 181.420 British pence ($2.45) per therm.

The US Centcom said on Tuesday it had completed a series of strikes against Iran's Islamic Revolutionary Guard Corps targets. This included air defense sites, radar systems, maritime assets, mine-laying capabilities and communication sites, it posted on X.

This, they said, was in retaliation against attempted strikes by the IRGC against commercial shipping through the strait and US service members positioned in the region.

Meanwhile, Iran's IRGC said on Wednesday that two oil tankers were struck by mines while transiting through the Hormuz, leading the crew to abandon the vessels, according to a report by Iran International.

The IRGC Navy noted that it had warned against "the dangers of passing through the mined channel," while threatening more "punitive measures" against shipping companies that fail to utilize the authorized shipping routes prescribed by Tehran.

Traffic through the Strait of Hormuz stood at 13 on Tuesday, according to ShipFinder.

Daniel Hynes, a senior commodity strategist at ANZ, noted that European natural gas prices had hit their highest level since January 2023, due to the resumption of the conflict.

He cautioned that LNG flows, which were already "at a standstill," were set to get a lot worse following the latest escalation, with Qatar, the world's largest exporter of the commodity, becoming more cautious about resuming exports, while demand continued to mount from Asian buyers.

This comes amid persistently low European gas inventories at 65.39% of capacity, compared to 77.65% 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 82.1%, according to the Swiss Federal Office of Energy.

Warm weather forecasts across much of the western and southern parts of Europe offer much-needed respite for the region, helping ease heating gas demand, as countries focus on rebuilding inventories.

Temperatures are expected to climb between 3 and 7 degrees Celsius above normal, spread across France, Italy, the Iberian Peninsula and the Balkans, according to a Bloomberg report.

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