Natural gas prices in Europe surged after the US pledged to block all vessels passing through the Strait of Hormuz that call at or are bound for Iranian ports, UNN reports, citing Bloomberg.
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Benchmark gas futures jumped as much as 18% during Asian trading hours before paring gains as European market participants came online. The trading day for contracts expanded to 21 hours from 10 on Monday.
The US and Iran failed to reach an agreement after marathon peace talks in Pakistan over the weekend, raising doubts about the possibility of finding a long-term solution to the six-week war that has cut off about 20% of the world's liquefied natural gas supplies. US forces will begin implementing the blockade, which does not apply to other vessels risking passage through the disputed waterway, at 10:00 a.m. New York time (3:00 p.m. Kyiv time) on Monday, the publication writes.
"The US blockade of Iranian traffic through the Strait of Hormuz is likely to lead to Iran tightening its own blockade even more severely, meaning that the global market will increasingly feel the shortage of LNG from the Persian Gulf," said Arne Lohmann Rasmussen, chief analyst at Global Risk Management. "This intensifies competition between Asia and Europe and points to higher prices today."
The failure of peace talks threatens to provoke new volatility in the gas market and lead to a shortage of global supplies. While most Middle Eastern gas typically flows to Asia, persistent disruptions to transport links are likely to intensify competition for limited global LNG supplies just as Europe seeks to build up reserves ahead of next winter, the publication notes.
European gas prices have risen by approximately 50% since the first US and Israeli attack on Iran in late February. Prices fell last week after the US and Iran announced a ceasefire, which many observers hoped would allow energy supplies from the region to resume. While some oil supertankers passed through the strait over the weekend, LNG-carrying vessels have not yet made the journey.
"Uncertainty about the scale and timing of the resumption of shipments in the Strait of Hormuz continues to cause significant market volatility," Timera Energy analysts wrote in a note.
Dutch gas futures for next-month delivery, the European gas benchmark, traded 8.5% higher at 47.34 euros per megawatt-hour by 8:49 a.m. in Amsterdam.
Oil soars 7% to over $100 ahead of US blockade against Iran13.04.26, 08:37