European and British wholesale natural gas prices rose on Wednesday as markets assessed the potential impact of escalating military activity involving the United States and Iran on liquefied natural gas supplies through the Middle East.
The front-month Dutch TTF contract reached €79 per megawatt-hour, its highest level since 2023.
In Britain, the equivalent NBP wholesale gas contract rose to 196 pence per therm, reaching its highest level since late 2022.
Markets assess Strait of Hormuz supply risks
The increase in gas prices followed further military developments in the Middle East.
Iranian-backed Houthi forces in Yemen carried out attacks against several Saudi Arabian cities on Tuesday. The developments also included U.S. strikes against several Iranian oil tankers and an Iranian missile attack targeting a U.S. military base in Jordan.
Energy markets are monitoring the potential implications for shipping through the Strait of Hormuz, which accounts for approximately 20% of global liquefied natural gas traffic, with Qatar a major source of LNG transported through the waterway.
European utilities could face increased competition with Asian buyers for alternative LNG cargoes if shipments through the Persian Gulf are disrupted. Brent crude was also trading near $99.50 a barrel.
European gas storage stands at around 64%
The increase in wholesale gas prices comes as Europe approaches the end of its summer storage injection period with inventories below their five-year seasonal average.
Data from Gas Infrastructure Europe showed underground storage facilities at approximately 64% of capacity.
Storage replenishment during August and early September has been affected by higher gas demand for electricity generation during periods of hot weather, offshore pipeline maintenance in Norway and delays to Qatari LNG shipments.
Higher natural gas and crude oil prices are also being monitored for their potential effect on European energy costs and inflation.
The European Central Bank is due to announce its latest monetary policy decision on Thursday. Money markets were pricing in a 25-basis-point interest rate increase as investors assessed higher headline Eurozone inflation, including increases in energy prices.
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