Benchmark European wholesale gas rose again to its highest level in more than three years on Monday, tracking a surge in oil, as the US-Iran conflict entered its second week and shipping around the Strait of Hormuz remained at a near standstill.
Iran named Mojtaba Khamenei to succeed his slain father as supreme leader on Monday, signalling that hardliners remain firmly in charge and appearing to close off any path to a swift end to war in the Middle East.
The prospect that the disruption to global energy supplies - already one of the most severe in history - could last longer than previously expected sent oil prices surging to over $119 a barrel.
The Dutch front-month contract at the TTF hub, the benchmark price for Europe, hit its highest since early January 2023, jumping nearly 25 per cent to €66.50 per megawatt hour. By 10:01 GMT it was trading at €61.60/MWh, a 15.7 per cent rise, ICE data showed.
It had previously hit the highest since January 2023 on March 3.
The British April contract, which rose 20 per cent earlier in the session, was trading 15.4 per cent higher at 158.60p per therm.
"Developments in the Middle East will continue to dominate price movement. The choice of Khamenei’s son as the Iranian’s new supreme leader, considered a hardliner, and Trump weighing deployment of ground forces, certainly point towards the war lasting ever longer," said LSEG analyst Ulrich Weber.
Analysts at Societe General Commodities Research said the price increase also reflects tighter balances driven primarily by two factors:
"An increase in LNG demand of around 0.2 million tonnes, largely from Egypt and Jordan, as we assume marginal Israeli pipeline gas supply for at least two weeks while upstream fields remain offline; and second, a reduction of roughly 2.4 million tonnes in LNG supply from Qatar and the UAE," they said.
Across north-west Europe, the end of this week and the next have turned colder in most recent weather forecasts than last Friday, lifting heating demand expectations, LSEG data showed.
(Reporting by Marwa Rashad; Editing by Nina Chestney)