European and British wholesale natural gas futures rose on Tuesday, recovering part of the previous session’s losses as traders reassessed the prospects for diplomatic discussions between the United States and Iran.
The benchmark Dutch front-month TTF contract increased 1.6% to approximately €78.80 per megawatt-hour (MWh), moving away from a near two-week low reached on Monday.
In Britain, the equivalent NBP wholesale gas contract also gained 1.6%, reaching around 195.40 pence per therm.
Both contracts had fallen by more than 7% on Monday, recording their largest single-session declines in almost two months.
Dutch and British Gas Futures Recover
European natural gas prices rebounded on Tuesday following a substantial decline at the beginning of the week.
The Dutch TTF front-month contract rose 1.6% to approximately €78.80/MWh, while the British NBP contract advanced by the same percentage to around 195.40 pence per therm.
The recovery followed losses exceeding 7% for both benchmarks on Monday, when prices recorded their steepest daily falls in nearly two months.
The earlier decline came after comments from US President Donald Trump raised the possibility of direct discussions with Iranian President Masoud Pezeshkian during the United Nations General Assembly in New York.
Tuesday’s increase indicated that traders were reassessing the immediate implications of those diplomatic developments.
US-Iran Diplomatic Prospects Influence Gas Markets
Trump indicated that he was open to bilateral discussions with Pezeshkian, who is attending the United Nations General Assembly this week.
The comments prompted a decline in energy prices on Monday as traders considered the possibility that renewed negotiations could reduce tensions in the Middle East.
The conflict has continued for seven months, creating concerns about energy shipments through the Strait of Hormuz and other transport routes in the Persian Gulf.
The prospect of diplomatic engagement reduced some of the additional costs associated with supply disruption risks.
However, the supplied report does not confirm that direct talks have been arranged or that an agreement is imminent.
Gas prices recovered on Tuesday as market participants reassessed those uncertainties.
Supply Constraints Remain a Concern
Despite the possibility of renewed diplomatic contact, physical energy flows through key transport routes in the Persian Gulf remain severely constrained, according to the supplied report.
Restrictions affecting these routes continue to create uncertainty over the availability and transportation of energy supplies.
The Strait of Hormuz remains particularly important because of its role in international oil and gas shipments.
Any improvement in diplomatic relations could influence market expectations, but the effect on physical supply would depend on subsequent developments.
The recovery in European gas futures reflects the continuing uncertainty surrounding the conflict and the outlook for energy transportation.
Brent Crude Declines as Alternative Shipping Routes Expand
Brent crude futures edged lower on Tuesday after falling approximately 3% in the previous session.
The decline followed reports that energy companies and maritime operators were using alternative arrangements to transport oil from the region.
These included overland pipelines and ship-to-ship loading operations off Oman, intended to bypass transport restrictions in the Persian Gulf.
The arrangements may help maintain some energy shipments despite difficulties affecting established routes.
Lower crude prices provided a contrasting influence to the modest rebound in European gas futures.
The effectiveness of alternative transport arrangements will remain relevant to the outlook for regional energy supplies.
ECB Warns of Faster Inflation Impact From Gas Price Increases
The European Central Bank highlighted the potential inflationary consequences of higher wholesale gas prices in its Economic Bulletin.
According to the ECB, changes in European energy markets since 2022 have accelerated the transmission of wholesale gas price increases to retail prices in many eurozone economies.
The central bank indicated that wholesale gas price surges can affect retail inflation within one to three months in more than half of euro area countries.
This means that renewed increases in wholesale gas prices could feed into consumer inflation relatively quickly.
The findings underline the relevance of energy market developments to inflation expectations and the outlook for European monetary policy.
Outlook
European and British natural gas prices recovered 1.6% on Tuesday after declining by more than 7% in the previous session.
The rebound came as traders reassessed the possibility of direct US-Iran discussions against continuing constraints on energy transportation through the Persian Gulf.
Alternative shipping arrangements and lower crude prices may help alleviate some supply concerns, although the outcome of diplomatic efforts remains uncertain.
Further developments in the Middle East, physical energy flows and wholesale gas prices will remain important for European energy markets and inflation expectations.
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