After the joint U.S. and Israeli attacks on Iran, the closure of the Strait of Hormuz—a waterway of strategic importance for global energy supply—and the suspension of production at an LNG facility owned by QatarEnergy, European gas prices have risen by more than 100%.
Commercial ship traffic has come to a halt in the Strait of Hormuz, through which approximately 20% of the world’s LNG exports pass. Nearly all of Qatar’s LNG exports—Qatar being one of the world’s largest LNG exporters—previously reached international markets via the strait.
After an unmanned aerial vehicle (UAV) launched from Iran targeted QatarEnergy’s LNG production facility in Ras Laffan Industrial City, the company halted LNG production there yesterday.
The inability to ship LNG through the strait and the suspension of production at the critical Qatari facility have accelerated the rally in European gas prices.
At the Netherlands-based virtual natural gas trading hub Title Transfer Facility (TTF), which is Europe’s deepest gas market, April futures contracts rose to €65.5 per megawatt-hour as of 14:20 local time.
Before the U.S. and Israeli attacks on Iran, prices had closed at €31.95 per megawatt-hour on February 27.
Thus, European gas prices have more than doubled compared to pre-attack levels. Today’s increase reached 47% compared to yesterday’s closing price.
Competition in International Markets May Intensify
Approximately 20% of global LNG export capacity is located in Qatar.
The simultaneous shutdown of the Ras Laffan and Mesaieed facilities represents one of the largest supply shocks to the natural gas market since the start of the Russia-Ukraine War in 2022.
QatarEnergy’s declaration of force majeure in LNG supply has increased uncertainty for buyers tied to long-term contracts, raising the likelihood that they may have to turn to the spot market.
The halt of ship traffic through the Strait of Hormuz—an important route for natural gas and oil exports—has intensified competition between Europe and Asia for alternative LNG supplies from the United States and Australia, further pushing prices upward.
Europe, which has decided to stop purchasing gas from Russia, is also facing a challenging period. The filling rate of natural gas storage facilities in EU countries stands at 30%, a lower level compared to the same period last year.
The Gas Coordination Group, which brings together representatives of EU member states to monitor gas storage and supply security and coordinate emergency measures during crises, will convene on March 4 to assess the impact of the conflicts in the Middle East.
Source: PAtronlar Dünyası/ Prepared by: İlayda Gök