European Natural Gas Prices Fall from 3-1/2-Year High

European natural gas prices fell below €67 per megawatt-hour, easing from Monday’s 3½-year high of €68.46, as improving prospects for de-escalation between the US and Iran reduced some concerns over supply disruptions. Gas prices tracked a broader decline in energy markets after Washington’s latest measures against Tehran appeared less likely than expected to disrupt physical supplies. Diplomatic efforts also offered some relief, with Pakistan’s army chief visiting Iran and Qatar continuing to support mediation between Tehran and Washington. Reports that the US could begin returning evacuated diplomats to the Middle East also suggested that an immediate escalation in the conflict may be less likely. Nevertheless, supply risks remain, particularly as disruptions around the Strait of Hormuz have constrained LNG deliveries from Qatar. At the same time, persistent hot weather is boosting cooling demand, making it harder for European countries to rebuild gas inventories ahead of winter.

European natural gas prices held above €68/MWh on Tuesday, the highest level since January 2023, as fresh US measures against Iran intensified concerns over further disruptions to energy supplies from the Persian Gulf. The US Treasury said expanded secondary sanctions would target Iran’s digital assets, technology, gold, aviation and shipping sectors. It also imposed new sanctions on nearly 60 entities, individuals, and vessels allegedly involved in generating oil revenues for Iran, procuring weapons, and supporting cyber operations. These developments have added to already elevated supply risks in Europe, where the continued blockade of the Strait of Hormuz has constrained LNG deliveries from Qatar. The disruption has coincided with stronger cooling demand amid persistent heatwaves, making it more difficult for Europe to rebuild gas inventories and heightening fears that the region could enter the winter heating season with insufficient supplies.

European natural gas prices rose more than 3% to over €68/MWh, the highest since January 2023, as investors awaited details of a US plan to economically isolate Iran that could further disrupt energy supplies from the Middle East. Treasury Secretary Bessent is scheduled to hold a press conference later today and has threatened to impose “the toughest sanctions in history” on Iran. This follows President Trump’s threat last week to impose sanctions on countries that continue trading with Tehran. Iran, however, dismissed the threats as a sign of desperation, saying the new sanctions would fail to defeat Tehran. For Europe, concerns over gas inventories are becoming increasingly pressing, as ongoing tensions between the two sides have kept the Strait of Hormuz largely closed, delaying Qatari LNG deliveries to Europe. This, combined with heatwave-driven cooling demand, has slowed the pace of inventory replenishment, leaving European storage levels under greater pressure ahead of winter.