European gas prices rebound as Hormuz uncertainty clouds supply outlook

European natural gas prices moved sharply higher on Monday as continued uncertainty over shipping through the Strait of Hormuz outweighed tentative signs of diplomatic progress, highlighting Europe’s ongoing exposure to disruptions in global energy supply routes.

Benchmark Dutch front-month gas futures climbed 2.9% to around €56.90 per megawatt-hour, recovering part of the losses recorded last week. Comparable British wholesale gas contracts rose 2.6% to 139.50 pence per therm.

The renewed increase followed reports that a draft agreement between Iran and Oman establishing new shipping channels through the Strait of Hormuz was approaching completion. However, Tehran indicated that the strategically important waterway would not fully reopen until additional conditions involving the U.S. had been addressed.

The outstanding demands have reduced expectations for an immediate return to normal liquefied natural gas traffic through the Persian Gulf. With a significant share of global LNG supplies dependent on the region, continued disruption is keeping international gas balances under pressure.

Shipping restrictions are also delaying summer cargoes from major Middle Eastern exporters including Qatar. This comes at a sensitive time for Europe, where utilities are attempting to rebuild inventories ahead of the winter heating season.

European Union underground gas storage facilities entered the middle of August at approximately 56% capacity, leaving inventories considerably below historical averages for this stage of the year.

Higher-than-usual summer temperatures across southern Europe have added to the challenge. Increased demand for air conditioning has raised electricity consumption, forcing power generators to burn more natural gas and reducing the volumes available for injection into storage facilities.

European utilities are simultaneously competing with Asian buyers for available spot LNG cargoes. Against this backdrop, energy analysts expect European gas prices to retain significant underlying support, with contracts likely to remain particularly sensitive to further developments surrounding negotiations and shipping conditions in the Persian Gulf.