European gas prices rise after Strait of Hormuz closes again

The wholesale price of gas for the European market has been rising since this morning. It is reacting to renewed tensions in the Middle East and the Strait of Hormuz being closed again, a route normally used to transport a fifth of the world’s liquefied natural gas (LNG) supplies. At around 7:45 CEST, the key futures contract for gas for delivery next month was up 7.6 percent at 41.70 euros (over 1,000 Kč) per megawatt-hour (MWh) at the virtual Title Transfer Facility (TTF) trading hub in the Netherlands.

Gas prices had already risen to as much as 74 euros per MWh in mid-March due to the closure of the Strait of Hormuz following an attack on Iran by US and Israeli forces.

“The key question now is whether ships can actually pass through the Strait of Hormuz,” asset manager Kenneth Goh of UOB Kay Hian Pte. told Bloomberg.

“Friday’s record high for the S&P 500 was based on the assumption that the ceasefire with Iran would hold, and the weekend showed that this is not a reliable assumption,” he added.

The US Navy attacked a merchant vessel sailing under the Iranian flag in the Gulf of Oman and took control of it, US President Donald Trump announced on Sunday. In addition to Iran beginning to stop and turn back ships near the Strait of Hormuz, Iran’s Revolutionary Guard Corps opened fire on two commercial vessels on Saturday, according to the UK Maritime Trade Operations (UKMTO).

Nevertheless, according to data from Kpler, more than 20 vessels carrying petroleum products, metals, gas and fertilisers passed through the strait on Saturday. It was the busiest day there since 1 March.

The United States and Israel attacked Iran on 28 February. In retaliation, Tehran and its allies began attacking Israel and Arab states in the region that host US military facilities, using drones, ballistic missiles and rockets. Iranian attacks also targeted civilian sites, including oil infrastructure and merchant ships in the Strait of Hormuz. The week before last, the United States and Iran agreed to a two-week ceasefire intended to allow negotiations on ending the conflict. The ceasefire and the deadline for negotiations end on Tuesday.

The situation in the Strait of Hormuz changed little for most of the ceasefire, although Washington had initially made a change there a condition for suspending attacks. Last Monday, the US announced that it had begun a naval blockade of Iranian ports and coastline. At the end of last week, Tehran announced that the Strait of Hormuz was open to shipping. The US nevertheless said it would continue its blockade of Iranian ports, after which Iran announced that it was closing the strait again.