Dutch and British wholesale gas prices firmed on Friday morning, following sharp rises in the previous trading session, due to tensions between the US and Iran that could impact shipping of liquefied natural gas (LNG).
The concern for the gas market is any potential disruptions to LNG shipments through the Strait of Hormuz, especially from the world's second largest supplier Qatar.
The Dutch front-month contract rose as much as 16 per cent in intraday trade on Thursday. The last time the price had a greater daily rise was August 9, 2023 over fears about Australian LNG strikes when prices jumped 27.54 per cent, LSEG data showed.
Prices rose less steeply on Friday morning but the bullish geopolitical driver remained. The Dutch contract for March was up €0.54 at €33.40 per megawatt hour (MWh), by 08:51 GMT, LSEG data showed. The Q2 contract rose by €3.11 to €31.49/MWh.
"Escalation in the Middle East would leave a sizeable amount of global LNG trade at risk and at a time when the EU holds lower than usual gas inventories. EU gas storage is less than 32 per cent full at the moment, well below the five-year average of 49 per cent full," said analysts at ING.
Last night, US President Donald Trump warned Iran on Thursday it must make a deal over its nuclear programme or "really bad things" will happen, and set a deadline of 10 to 15 days, drawing a threat from Tehran to retaliate against US bases in the region if attacked.
In terms of market fundamentals, average temperatures in north-west Europe are forecast to be milder until mid-March, LSEG data showed. Supply is largely stable.
In the British market, the day-ahead price was up 2.40p at 82.05p per therm.
(Reporting by Nina Chestney)