European gas prices resume sharp rise due to war in the Middle East

The wholesale price of gas for the European market resumed its sharp rise today due to the escalation of the conflict in the Middle East. The key front-month gas futures contract temporarily reached 70 euros (1700 Kč) per megawatt-hour (MWh), with its price up by about 30 percent. It thus surpassed the previous week's high, when it rose above 65 euros per MWh. However, it remains well below the record set in the summer of 2022.

Shortly after 11:00 CET, the price of gas for delivery in April at the Title Transfer Facility (TTF), a virtual trading hub in the Netherlands, was up by around 18 percent and stood just below 63 euros per MWh. The record price for a gas contract was set on 26 August 2022, when it temporarily reached around 319 euros per MWh. Until 2020, the price typically ranged between ten and 25 euros per MWh.

The current war in the Middle East began with an attack by US and Israeli forces on Iran on the last day of February. It has now lasted ten days, and the conflict shows no signs of easing, bringing greater uncertainty to energy markets and fuelling inflationary pressures. Europe is in a vulnerable position, particularly in natural gas markets, as winter is ending and storage facilities are depleted. This means European countries will need to buy more liquefied natural gas (LNG) this summer to refill their storage facilities, Bloomberg reported.

Europe will therefore compete for limited supplies with buyers in Asia unless deliveries from the Middle East reach the market by then.