The US attack on Iran drives gas prices higher in Europe
European natural gas prices jumped after QatarEnergy suspended LNG production following Iranian retaliation against key energy infrastructure in the country.
Following the US attack on Iran, European gas futures recorded their largest daily increase since the 2022 energy crisis.
The TTF index, Europe’s main virtual gas trading hub based in Amsterdam, rose by more than 50%, surpassing €47 per MWh. The surge reflects market concerns over global supply security, given that Qatar accounts for roughly one fifth of global LNG supply. In Europe, diesel prices rose by 4.3%, reaching $925 per metric ton.
QatarEnergy halted operations at Ras Laffan and Mesaieed after Iranian drone strikes. The extent of the damage and the threat of further attacks prompted the company to suspend scheduled shipments.
Oil and commodity markets react
The escalation of the Middle East conflict has shaken commodity markets. In addition to gas, oil prices also climbed significantly, with Brent crude returning above $80 per barrel.
Russia’s reaction and market outlook
Analysts expect prices to remain elevated in the coming days. Investment bank Bernstein warned that in an extreme scenario of prolonged conflict, crude oil prices could spike to between $120 and $150 per barrel. Some analysts, however, consider the oil market more resilient, noting that recent events could have triggered even sharper increases.
Russia stands to benefit from the attacks on Iran. Moscow is eager to sell oil at higher prices to finance the war in Ukraine. Although it continues to sell at significant discounts to China and India, the broader rise in prices favours Russian revenues.
Global LNG scramble
In London’s marine insurance market, premiums surged immediately after the military operation began. Over the weekend, war-risk insurance coverage was reportedly withdrawn.
According to Reuters, shipping constraints and the production halt in Qatar prompted India to ration natural gas, while countries across Asia turned to the spot market to replace supplies or activated emergency plans.
Rising risks for Europe
Europe is particularly exposed to the disruption. Over the past four years, in response to the war in Ukraine, European countries increased reliance on seaborne LNG to replace Russian gas. With higher seasonal demand expected in summer, the suspension of Qatari supplies risks triggering a global scramble for alternative cargoes.
“If the market begins pricing in a prolonged loss of Qatari supply, the TTF price could potentially spike to between €80 and €100 per MWh,” Warren Patterson of ING told Bloomberg.
Although most Qatari LNG is destined for Asia, reduced global supply leads to higher prices worldwide. European buyers may therefore need to offer higher premiums to secure cargoes from the United States or Africa. Analysts warn that, as in 2022 following Russia’s invasion of Ukraine, Europe could face a new energy crisis with inevitable inflationary consequences.
“The European Commission is closely monitoring price and supply developments and will establish an Energy Task Force with Member States, in cooperation with the International Energy Agency, holding its first meeting this week,” the EU executive’s Security College announced.