European natural gas prices rose to €73.7/MWh on Tuesday, hovering at their highest level in more than three and a half years, as LNG supply from the Persian Gulf remained severely disrupted amid heightened tensions between the United States and Iran.

The escalation in fighting between the two nations underscored the difficulty of reaching a resolution to the conflict that could reopen the Strait of Hormuz, a narrow chokepoint between Oman and Iran through which a significant share of the world's seaborne oil and LNG trade normally passes. On Monday, Iran warned that energy infrastructure across the region, including US oil and gas facilities, could be vulnerable to further attacks.

Qatar, one of the world's largest LNG exporters, has largely suspended LNG shipments and extended force majeure on cargoes bound for European and Asian markets through the autumn, as shipping disruptions continue along the critical waterway. The halt is especially significant for Europe, which has grown more dependent on seaborne LNG imports since the loss of Russian pipeline supply following the 2022 invasion of Ukraine, making Gulf tanker routes a critical link in the continent's energy supply.

The reduced inflow has slowed the pace of gas storage injections in Europe. EU storage facilities are around 66% full, below the seasonal average, leaving the gas market increasingly vulnerable as the heating season approaches. Under EU rules, member states typically aim to fill storage to 90% of capacity ahead of winter, making the current shortfall a source of concern for the bloc's energy security. Whether storage levels can recover will depend in part on cargoes from alternative suppliers such as the United States, Norway, and other Atlantic-basin exporters being able to offset the missing Qatari volumes, as well as on any easing of shipping conditions through the Strait of Hormuz.

Source: Trading Economics via Hellenic Shipping News