Benchmark futures jumped as much as 25 percent, the biggest gain since August 2023, after tanker traffic through the Strait of Hormuz was largely suspended over the weekend, it says. Bloomberg.
The narrow seaway is a key energy route, carrying about a fifth of the world's liquefied natural gas exports. Oil prices have also surged. The situation threatens to be the worst blow to the gas market since Russia's invasion of Ukraine four years ago, which upended global energy trade.
Every disruption raises prices
Although Asian countries buy most of their LNG from the Middle East, any disruption increases competition for alternative sources, pushing up prices around the world, including in Europe.
Europe is particularly exposed. Although the continent is nearing the end of winter and gas consumption is slowing, supplies are unusually low. The region needs to import large amounts of LNG this summer to replenish them before the next heating season, and “the next key question for traders will be how long the strait will remain closed,” said Tom Marzec-Manser, director of European gas and LNG at Wood Mackenzie Ltd.
"The longer it stays closed, the higher the price will be," he added.
US President Donald Trump said in an interview with the New York Times that he intends to continue bombing Iran for the next four to five weeks.
Futures fell last week and then rose again
Goldman Sachs estimates that a month-long suspension of traffic through the strait could double gas prices in Europe. That would be a significant shock to the market after benchmark futures fell 19 percent last month, thanks to mild weather and ample supply.
"This situation could complicate storage filling operations in the coming months and put renewed pressure on industrial energy costs," said Simone Tagliapietra, an analyst at the Bruegel think tank in Brussels.
The conflict intensified over the weekend after the US and Israel attacked Iran. Tehran responded with strikes on several countries. LNG tankers that were scheduled to load cargo in Qatar and the United Arab Emirates are now being delayed or rerouted.
Israel shuts down part of its gas production capacity
In addition, Israel on Saturday ordered the temporary closure of some gas production capacity as a safety measure, prompting Egypt, a major importer, to seek additional LNG shipments.
Israel has three projects, including the large Leviathan gas field, which was also shut down as a precaution when Israel and Iran were at war in June.
