Oil & Energy
EMEA Natural Gas Update: Futures Rise as US Moves to Blockade Iran, Israel Signals Ceasefire End
European natural gas futures soared about 8% on Monday, after US President Donald Trump declared a blockade against Iran on the Strait of Hormuz.The front-month Dutch TTF contract was up 7.88% to 47.07 euros ($55.06) per megawatt-hour, while UK NBP futures were up 8.08% to 118.55 British pence ($1.59) per therm.In a Truth Social post on Sunday, Trump said the US and Iran failed to reach an agreement during the talks held in Pakistan over the weekend, citing irreconcilable differences over Tehran's nuclear program.In response, Trump said that the US Navy would now begin blockading Iran by preventing ships from entering or leaving the country's ports.He also added that the Navy will seek out and interdict all commercial vessels that have paid a toll to Iran to secure passage through the Strait. "No one who pays an illegal toll will have safe passage on the high seas," he said.On Sunday, in a post on X, US Central Command said that they will begin the blockade starting Monday at 10 AM ET, while noting that it will not impede freedom of navigation for other vessels transiting through the Strait "to and from non-Iranian ports."Meanwhile, Iran's Islamic Revolutionary Guard Corps Navy has said that the crucial waterway that accounts for 20% of global LNG flows, "will never return to its former state, especially for the US and Israel," according to a report by Hindustan Times, citing Iran's Press TV.Besides this, Israeli Prime Minister Benjamin Netanyahu has reportedly warned that the two-weeks long ceasefire could come to an end sooner than expected, according to various media outlets, sparking fresh concerns on commercial vessel movement on the Strait.The Strait remained effectively closed for the seventh week running, but witnessed an uptick in traffic, with 10 vessels transiting over the past 24 hours, according to the Hormuz Strait Monitor.This marks a sharp decline from the Strait's typical daily average of 138 vessels, according to the UK's Joint Maritime Information Center, which also noted that there have been no new attacks against vessels over the past 48 hours.According to Daniel Hynes, a senior commodity strategist at ANZ, these developments over the weekend "will exacerbate the supply disruptions" already facing the global economy.Hynes noted that no LNG tankers have transited through the Strait for weeks, adding that the conflict has shifted the outlook from "gradual easing to prolonged tightness."While most Middle Eastern LNG flows typically head towards Asia, this prolonged disruption is increasing global supply competition, leading to elevated prices in European markets, especially as countries begin to refill their inventories for the next winter.Europe's storage levels remain depleted, at just 29.34% of inventory, compared to 35.11% during the corresponding period a year ago, according to Gas Infrastructure Europe.On a positive note, most parts of Europe are expected to experience above-normal temperatures this Summer, which stands to diminish heating gas demand in the near-term, according to Severe-Weather EU.