Gas price climbs to over 79 euros due to Middle East escalation

The price of gas climbs to more than 79 euros - the cause is the escalation in the Middle East. And the low filling levels of European gas storage facilities could increase prices even further.

Gas: Prices have almost doubled since the beginning of July. Photo: dpa

The price of European natural gas reached a long-term high on Wednesday as the situation in the Middle East worsened. For the first time since the end of 2022, the landmark natural gas futures contract TTF for delivery in one month on the Amsterdam stock exchange rose to 79.11 euros per megawatt hour (MWh). Most recently it cost 78.64 euros. That was 1.22 percent more than the day before.

The conflict between the USA and Iran over control of the Strait of Hormuz has recently escalated further. The US military said it destroyed five Iranian crude oil tankers and sank one in retaliation for Tehran's attacks on a US warship.

Iran's Revolutionary Guards said they responded with “heavy missile attacks” on the US-allied Kingdom of Jordan. According to the Jordanian state news agency Petra, the army intercepted 20 ballistic missiles.

With the latest price jump, natural gas is more expensive wholesale than at the beginning of the Iran war, when the price briefly rose above 70 euros per MWh in March. The last time the price was higher was in 2022, when it temporarily rose to over 300 euros after a Russian delivery stop as a result of the Ukraine war.

The current price driver is the concern that deliveries of liquefied natural gas (LNG) from the production areas in the Persian Gulf could be permanently blocked. A sustainable opening of the Strait of Hormuz is not in sight. There is hardly any hope of a negotiated solution on the financial markets.

Increase from 40 to almost 80 euros

The price of gas has been rising since the beginning of July. At that time it was still around 40 euros. The main natural gas producer in the region is Qatar. The Qatari state-owned company QuatarEnergy has largely reduced its production in view of the situation on the Strait of Hormuz.

Experts do not see a trend reversal in the gas market. “A colder winter is now generally expected in Asia due to the El Niño weather phenomenon, which could result in higher LNG demand there,” expects Commerzbank expert Norman Liebke. “Due to the low levels of gas storage in Europe, demand for LNG in this country will also remain high, which could increase competition and, as a result, further increase prices.”

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