Natural gas prices in Europe have risen sharply since the outbreak of hostilities in the Middle East. So has the price of oil, which has reached a four-year high.
Points of attention
- Fighting in the Middle East has led to a significant spike in natural gas and oil prices, with Europe particularly vulnerable due to low gas reserves.
- The halt in tanker traffic through the crucial Strait of Hormuz is threatening energy markets, causing experts to predict potential price spikes in Europe and Asia.
Military operation against Iran has increased oil and gas prices
Underlying futures jumped as much as 25%, the biggest gain since August 2023. The immediate reason for the rise is that tanker traffic through the Strait of Hormuz has almost ground to a halt this weekend.
This narrow waterway is a key route for transporting energy resources and provides transportation of about 20% of the world's liquefied natural gas exports.
According to experts, the situation threatens the most serious shock to gas markets since Russia's invasion of Ukraine four years ago, which significantly affected global energy trade.
Experts agree that any disruptions will intensify competition for alternative sources of supply, pushing up prices around the world, including in Europe, which is particularly vulnerable because its gas reserves are unusually low. The region needs to import significant amounts of liquefied natural gas this summer to replenish storage before next winter.
If shipping through the Strait of Hormuz is halted for a month, gas prices in Europe could more than double, analysts at Goldman Sachs Group Inc. believe. In this case, European prices and spot prices for liquefied natural gas in Asia could jump by 130% — to $25 per million British thermal units.
The war in Iran could also cause the biggest "oil shock" in recent years. Experts say prices will jump sharply in the near term and remain high for an indefinite period. Experts note that the Iranian leadership (or rather, what is left of it) may see dragging neighboring Persian Gulf countries into the crisis as one of the few ways to force the United States back to the negotiating table.
According to the Investing portal, as of 10:30 Kyiv time, the price of Brent crude oil had increased by almost 10%, to $79.97 per barrel. American WTI crude oil had jumped by almost 9%, to $73 per barrel.
Bloomberg notes that tanker traffic through the Strait of Hormuz, which carries 20% of the world's oil, has almost ground to a halt. Shipowners and traders have taken a break due to the spread of the conflict.
In response to the escalating conflict, OPEC+ agreed to increase oil production quotas by 206,000 barrels per day from April 1.
