European Gas Prices Ease

European natural gas futures dropped to €47.7 per megawatt hour after rallying 6.7% in the previous session on fears of prolonged supply disruptions. Monday’s sharp gains were driven by renewed tensions after Iran suspended indirect talks with the US over Israel's escalating attacks in Lebanon and threatened to extend the blockade of the Strait of Hormuz to the Bab el-Mandeb Strait, another critical chokepoint at the southern entrance to the Red Sea. Despite this, President Donald Trump said that talks were still ongoing. The continued closure of the Strait has cut around one-fifth of global LNG flows, posing a challenge for importing regions as the disruption has tightened global supplies and increased competition for cargoes. This raised concerns about Europe’s ability to rebuild gas inventories ahead of winter, as it only has 38% of its storage capacity filled.

European natural gas futures extended gains to more than 6%, approaching €49 per megawatt hour, as renewed geopolitical tensions raised concerns over global energy supplies. Prices were supported by reports that Iran would suspend exchanges of messages with the US in protest over Israel’s escalating military operations in Lebanon. Tehran accused Washington of sending mixed signals and delaying negotiations, while Foreign Ministry spokesperson Esmail Baghaei said Iran continued to engage with the US with “distrust.” President Donald Trump maintained that talks on an interim peace deal would “work out well,” despite renewed clashes near the Strait of Hormuz. The waterway has remained largely closed for three months, heightening concerns about LNG flows and Europe’s ability to rebuild gas inventories ahead of winter. European storage facilities are currently around 38% full, well below the five-year average of more than 50% for this time of year.

European natural gas futures rose above €48 per MWh, rebounding after a sharp decline last week as uncertainty persisted over a potential US–Iran agreement. Both countries traded messages proposing changes to a draft deal intended to extend their ceasefire and reopen the Strait of Hormuz, although it remained uncertain whether the talks were advancing meaningfully. Tensions in the wider region also escalated, with Israel and Iran-backed Hezbollah in Lebanon exchanging heavy cross-border strikes, while an Iranian ballistic missile struck a Kuwaiti air base. The Strait has remained largely closed for three months, and the prolonged disruption has heightened concerns that Europe could face difficulties rebuilding already relatively low gas storage levels ahead of winter.