European gas prices surge 50% to four-month high amid Strait of Hormuz tensions

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BRUSSELS — European natural gas prices shot to a four-month high as renewed violence around the Strait of Hormuz triggered concerns about the feasibility of transporting energy through the world’s most vital energy chokepoint.

The benchmark European natural gas price — known as the Dutch TTF — briefly crossed €60 per megawatt-hour on Monday, the highest level since mid-March, and settled at €59 per megawatt-hour on Tuesday after the United States launched a tenth consecutive night of strikes against Iran. Tehran responded by targeting U.S. allies in the region and tankers in the Persian Gulf.

Before a ceasefire was struck in June, gas prices had consistently stayed below €50 per megawatt-hour, with traders wary of placing big bets during a war that had become impossible to predict.

Tuesday’s prices represent a 50 percent increase from the previous month. They also reflect concern that gas supplies will be further squeezed by the combination of depleted European reserves and high summer temperatures in Asia, which analysts expect will drive up demand for air conditioning .

The latest price spikes have fueled concern that unrest in the Middle East is going to be priced in as a permanent feature of energy markets — especially with Washington and Tehran threatening tolls or “service fees” on maritime traffic and the announcement by the Iran-backed Houthi paramilitary group in Yemen that it would embargo the Bab al-Mandab Strait, another vital waterway in the region.

“The seemingly random nature of the continual opening and closing of the Strait of Hormuz means that this is no longer a reliable delivery route for the world’s LNG supplies,” said Tobias Federico, a senior analyst at Montel Energy.

“The recent surge in TTF shows that geopolitical risk is becoming a structural reality for energy markets,” said Alice Acuña, Moeve EVP Trading & Commercial Integration for Madrid-based energy company Moeve.