European natural gas futures gained more than 4.5% on Tuesday as the escalation in hostilities between the US and Iran and the renewed US naval blockade of Iranian ports dented hopes of a normalization of traffic through the Strait of Hormuz.
The front-month Dutch TTF contract rose 4.73% to 53.70 euros ($61.52) per megawatt-hour, while the UK front-month NBP contract gained 4.69% to 129.97 British pence ($1.74) per therm.
Dutch TTF futures passed the 53 euros per MWh level for the first time in over three months and touched their highest levels since March 30, according to Trading Economics data.
"With Hormuz again effectively closed, the market is back to the critical situation it faced ahead of the ceasefire, with limited supply, very low storages and heatwaves across Europe causing additional demand," Mind Energy said in a note on Tuesday.
"Reduced French nuclear availability adds to the upside and the TTF front month contract continues up this morning, reaching the highest price level in more than three months," it added.
The renewed conflict between Iran and the US has abruptly halted the gradual recovery in liquefied natural gas exports from the Middle East and raised fears of new disruptions to gas exports from the region, Trading Economics said.
ANZ analyst Daniel Hynes said that major producer Qatar delayed increasing LNG production due to safety concerns after one of its tankers was attacked.
"The latest events will make it increasingly difficult for Europe to refill its storage facilities heading into the northern hemisphere winter. Current storage levels sit at 52%, well below the normal seasonal level of 67%," according to ANZ analyst Daniel Hynes.
The US Central Command on Monday said it will recommence the blockade of maritime traffic entering and exiting Iranian ports from 4pm ET Tuesday. This follows an initial US blockade from April 13 to June 18.
President Trump said that the US will serve as the "guardian" of the Strait of Hormuz, while Central Command continues a sustained campaign of strikes against Iranian military targets to degrade their ability to threaten commercial traffic.
According to media reports, the US has launched more strikes on Iran, with explosions reported in Bushehr, Bandar Abbas, Mahshahr, and Abadan, while Iran retaliated by attacking US bases in Kuwait, Bahrain and Jordan, and two oil tankers in the Strait of Hormuz.
The ongoing Middle East conflict and delays in major projects have pushed an anticipated liquefied natural gas supply glut back by a year, with oversupply now projected in 2028, according to an analysis by BloombergNEF Tuesday.
A global LNG supply surplus is expected to peak in 2031-2032, with many new projects likely to come online, according to BNEF's global LNG outlook. Last year's report had projected a glut from 2027.
"Europe is looking vulnerable heading through the injection season, with storage just 52% full, well below the 5-year average of 68%. JKM's continued premium to TTF is prompting LNG cargoes to be redirected to Asia, leaving Europe tighter," research firm ING said in a note.