UK Natural Gas Climbs Above 183 Pence a Therm as US-Iran Conflict Escalates
Key Takeaways
- •UK natural gas prices exceeded 183 pence a therm, the highest level in more than three and a half years.
- •Iran said it targeted oil tankers and US-linked vessels and plans to create a restricted maritime zone beyond the Strait of Hormuz.
- •The Strait of Hormuz carries a significant share of globally traded LNG, including Qatari cargoes destined for Europe and Asia.
- •European gas storage stands at about 62%, below the five-year average and short of the EU's 90% target for November 1.
- •Europe's reliance on LNG increased after Russia's 2022 invasion of Ukraine cut much of the pipeline gas supply from Russia.
UK natural gas prices climbed above 183 pence a therm on Monday, reaching their highest level in more than three and a half years, as escalating tensions between the United States and Iran raised fears of further disruption to energy supplies from the Persian Gulf.
Iran said it had targeted oil tankers and several US-linked vessels, and announced plans to establish a restricted maritime zone beyond the Strait of Hormuz in the coming days. The Strait of Hormuz is one of the world's most important chokepoints for seaborne oil and LNG trade, and a significant share of globally traded liquefied natural gas passes through it — much of it Qatari cargoes bound for Europe and Asia. The UK, which now imports a growing share of its gas via LNG following the depletion of its North Sea reserves, is particularly sensitive to disruptions on these shipping routes.
The Iranian actions followed US strikes on Iranian oil tankers, which Washington said were carried out in retaliation for Tehran's missile attacks on US Navy warships.
The continuing tit-for-tat escalation is heightening concerns that Qatari LNG shipments to Europe could be delayed even further. Europe has grown more reliant on LNG since Russia's invasion of Ukraine in 2022 severed much of the pipeline gas supply that once flowed from Russia to the continent, making global shipping bottlenecks a direct price driver for the region.
Europe is approaching the end of its summer storage injection period, with gas storage facilities currently around 62% full, below the five-year seasonal average. Under EU rules, member states aim to fill storage to 90% by November 1, so the current shortfall increases pressure to compete for cargoes in the weeks ahead. This raises the risk of tighter competition for available supplies and leaves the region more exposed to potential price spikes during the colder months. Market participants are likely to watch the timeline and enforcement of Iran's announced maritime zone, tanker traffic through the Strait of Hormuz, and the pace of European storage refills as key indicators of whether supply risk eases or deepens.
Source: Trading Economics
