UK Natural Gas Prices Surge

UK natural gas prices jumped more than 4% to above 172 pence a therm on Tuesday, the highest level since January 2023, as the flare-up in US-Iran tensions heightened concerns over Europe’s gas supply security heading into the heating season. The US and Iran exchanged strikes for the first time in a month over the weekend, threatening to prolong the effective closure of the Strait of Hormuz, through which roughly one-fifth of global LNG trade normally passes. The prospect of sustained disruption has intensified competition with Asian buyers, tightening supplies bound for Europe during the critical gas-storage refill season. EU gas storage facilities were around 64% full, below historical levels for this time of year. Low storage levels and uncertainty over LNG supplies from the Persian Gulf are putting upward pressure on prices, offsetting milder weather forecasts for early September that could limit near-term demand.

UK natural gas prices fell below 165 pence per therm on Friday but remained near their highest level since January 2023, as supply risks remain amid uncertainty over a Middle East peace deal. Prices jumped on Thursday after reports that President Trump was not interested in returning to the terms of a June deal with Iran. This reversed losses from earlier this week, which were driven by progress in talks between Pakistan and Iran to end the conflict and an agreement between Tehran and Oman on control and revenues tied to the Strait of Hormuz. The near-closure of the Strait has continued to disrupt LNG supplies from Qatar, while extreme summer heat-driven cooling demand diverted supplies from storage. These factors have left Europe scrambling to secure supplies, heightening fears that the region could enter the winter heating season with insufficient reserves. For the week, UK gas prices rose around 4%, their third consecutive weekly gain.

UK natural gas prices hovered around 165 pence per therm on Thursday after falling for the previous two sessions, as investors assessed diplomatic progress in the Middle East. Iran’s military said Tehran and Oman had reached agreements on the sharing of control and revenues from the Strait of Hormuz. However, Tehran stressed that the deal does not imply an immediate reopening of the waterway and warned that the strait will remain closed unless the US ends the war, raising uncertainty over when supply conditions will improve. Continued restrictions in the strait have disrupted LNG flows from the Persian Gulf, causing severe delays to shipments from major exporter Qatar. At the same time, extreme summer heat has boosted demand for gas-fired power generation, leaving European gas storage just 63% full, the lowest level for this time of year since 2009. As a result, prices are likely to remain volatile, particularly if supply disruptions persist into the heating season.