European natural gas prices moved higher again on Tuesday, extending their recent rally as escalating military tensions in the Persian Gulf and severe disruption to tanker traffic through the Strait of Hormuz increased concerns over winter energy supplies.
Benchmark Dutch front-month gas futures rose 1.8% to €62.8 per megawatt-hour, while equivalent British wholesale contracts gained 1.2% to 154.4 pence per therm.
Both benchmarks advanced for a fifth consecutive session, their longest daily winning streak since late July, as traders continued to add a geopolitical risk premium to European gas prices.
Iran Escalation Adds to Energy Market Concerns
Reuters reported on Tuesday, citing Iranian officials, that Tehran had moved to a fully offensive military posture following the collapse of diplomatic efforts to secure a permanent peace agreement and Washington’s decision not to extend a temporary ceasefire framework.
The deterioration in the geopolitical situation follows threats from US President Donald Trump over the weekend to impose a strict naval blockade or pursue military action in response to interference with regional shipping.
The escalating rhetoric has increased concerns across energy markets that disruption to one of the world’s most important shipping corridors could persist.
LNG Tankers Face Growing Hormuz Disruption
Energy traders are increasingly pricing in the physical impact of the crisis as commercial commodity traffic through the Strait of Hormuz remains heavily disrupted.
Traffic through the strategically important waterway came to a standstill over the weekend, leaving Qatari liquefied natural gas tankers stranded and delaying spot LNG cargoes destined for European import terminals.
The disruption comes as European utilities compete with Asian buyers for available LNG supplies. Asian customers have been bidding more aggressively for spot cargoes as they seek to secure sufficient fuel ahead of the winter heating season.
Prolonged restrictions on shipping could intensify that competition and potentially increase the cost of replacing delayed supplies.
European Gas Storage Sits at Historic August Low
The disruption is occurring at a particularly sensitive point for European energy security.
Figures from Gas Infrastructure Europe show underground storage facilities across the European Union are only slightly above 60% full, representing a historically low level for the middle of August.
Persistent summer heatwaves have increased electricity consumption for air conditioning, while weaker LNG inflows have restricted the amount of gas available for storage injections.
The combination has slowed Europe’s efforts to rebuild inventories before colder weather arrives.
Winter Supply Risks Rise as Storage Refill Lags
With storage levels substantially below seasonal norms, traders are becoming increasingly concerned that Europe could enter the winter heating season with insufficient reserves if LNG shipments through the Strait of Hormuz do not return to normal.
Continued competition with Asian buyers could compound the challenge, particularly if both regions attempt to secure additional spot cargoes simultaneously.
The outlook for European gas prices is therefore becoming increasingly tied to developments in the Persian Gulf. A restoration of unrestricted LNG shipping could ease some of the current risk premium, while prolonged disruption would increase pressure on Europe to secure alternative supplies before winter.
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