European natural gas prices surged more than 4% on Monday, with the Dutch TTF front-month contract climbing to about €73.80 per megawatt-hour, close to last week’s peak of €74.32 and the highest level in more than three years. British wholesale gas prices also rose 2% to near 182.50 pence per therm, just below the 2023 high of 183.95 pence.
The rally reflects escalating US-Iran tensions around the Strait of Hormuz. Iran has announced plans to declare a restricted maritime zone after US forces struck and disabled three Iranian oil tankers over the weekend. Washington said the action was retaliation for Iranian ballistic missile attacks on two US Navy warships. The strait carries roughly one-fifth of global liquefied natural gas traffic, mostly from Qatar, making any prolonged disruption a direct threat to European supply.
Europe enters the colder months with unusually thin reserves: storage is only about 62% full, around 17 percentage points below the five-year average. A hot summer in Southern Europe, maintenance on Norwegian pipelines, and delayed Qatari LNG deliveries slowed refilling through August. Brent crude is also holding above $90 a barrel, adding to energy-cost pressure.
Goldman Sachs warned that oil could climb to $120 a barrel if attacks on Middle East shipping intensify, while a de-escalation could push Brent back to $80. Brent traded around $97.55 and WTI around $92.64. The bank recommended long positions in natural gas and diesel rather than crude, arguing supply shocks in those markets tend to be more severe. Goldman’s Daan Struyven said China may stabilize crude demand by reducing imports as prices rise, but it is unlikely to cushion natural gas or refined products.
The energy shock is feeding eurozone inflation, which reached 3.3% in August with energy costs up 14.3% year-on-year. The European Central Bank is widely expected to raise rates by 25 basis points on Thursday, reinforcing a tighter liquidity backdrop that may weigh on risk assets including cryptocurrencies.
