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EMEA Natural Gas Update: Futures Surge Over 8% Amid Lingering Hormuz Uncertainties, Low EU Inventories

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European natural gas futures rallied on Monday as uncertainties continued to linger over the restoration of normal shipping traffic through the Strait of Hormuz.

Front-month Dutch TTF contracts rose 7.73% to 59.840 euros ($69.09) per megawatt hour, while UK NBP futures rallied 8.36% to 147.320 British pence ($1.99) per therm.

US President Donald Trump is reportedly prepared to drop his push for a formal nuclear agreement with Iran if the country agrees to fully reopen the Strait of Hormuz, according to a report by the Wall Street Journal on Sunday, citing unnamed US officials.

Trump also said that his administration was only "semi-negotiating" with Iran, while noting that the country was reeling from massive inflation due to the ongoing US blockade, during a phone interview with Axios on Sunday, which signaled that Washington was not holding serious talks with Tehran.

"It will work out. It always works out. It's like a chess game," he said, referring to the back-and-forth negotiations with Tehran over the past several months.

Meanwhile, Iranian Foreign Minister Seyyed Abbas Araqchi noted that the country's deal with Oman regarding the Strait was in its "final stages," but reiterated that the reopening of the strategic waterway was contingent on several conditions, particularly addressing violations by the US, Mehr News Agency said.

Ali Nikzad, the Deputy Speaker of Iran's Islamic Consultative Assembly, said that the Strait of Hormuz wasn't returning to its pre-war condition, according to a report by Al Jazeera, citing Iran's Mehr News Agency. Nikzad also added that the US had "realised that the opening of the Strait of Hormuz has no military solution."

Traffic along the strategically crucial Strait, which accounted for one-fifth of global LNG flows, held steady, with 12 transits on Sunday, according to data from ShipFinder.

Daniel Hynes, a senior commodity strategist at ANZ, highlighted that European gas inventories were significantly below the average for this period, while noting that even if the Strait were to fully reopen, it would "require a sustained period of calm" for shipping companies to begin making regular transits through it.

Gas inventories remained lower than usual at 58.84% of capacity, compared to 71.25% during the corresponding period a year ago, according to data from Gas Infrastructure Europe.

Inventories were also significantly below the five-year average for this period, at 75.6%, according to the Swiss Federal Office of Energy.

Compounding these factors is a persistent heat dome across Central Europe and the Balkans, which is sending temperatures north of 40 degrees Celsius, raising demand for electricity and in turn, gas, according to a report by Severe-Weather EU.

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