Heightened military conflict in the Middle East has triggered a surge in European natural gas prices due to concerns over potential major disruptions to global energy supplies. Following a near-total halt of tanker traffic through the Strait of Hormuz over the weekend, benchmark natural gas futures soared by as much as 25%, marking the largest single-day increase since August 2023. This narrow waterway is a critical artery for global energy transport, handling approximately 20% of worldwide liquefied natural gas (LNG) exports. International oil prices also rose sharply. The current situation could lead to the most severe disruption to the gas market since the Russia-Ukraine conflict upended global energy trade four years ago. Although Asian nations are the primary buyers of LNG exported from the Middle East, any supply interruption would intensify competition for alternative supplies, thereby driving up gas prices globally, including in Europe. Europe is particularly vulnerable, as its gas storage levels are currently unusually low, and the region needs to import significant volumes of LNG this summer to replenish stocks before next winter. Goldman Sachs Group warned that if shipping through the Strait of Hormuz is disrupted for one month, European gas prices could more than double. Last weekend, attacks by the U.S. and Israel on Iran escalated the conflict, prompting retaliatory strikes by Tehran against several countries. LNG tankers originally scheduled to load in Qatar and the UAE now appear to be delayed or rerouted. Additionally, Israel has shut down some of its gas fields, leading major importer Egypt to seek additional LNG cargoes. While Iran has stated it does not intend to close the Strait of Hormuz, vessels began avoiding the strait shortly after the conflict erupted last Saturday. Qatar has announced a temporary suspension of all maritime traffic. At the time of writing, Europe's benchmark gas contract, the Dutch front-month futures, had climbed 22% to €38,954 per megawatt-hour.
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