Baku: European natural gas prices surged to their highest level since January 2023 on Monday as renewed tension in the Middle East sparked fears over potential disruptions to liquefied natural gas (LNG) exports from the Persian Gulf. According to Azerbaijan State News Agency, the front-month Dutch TTF gas contract was trading at £69.90 per megawatt-hour (MWh) at 11:34 a.m. local time (0834 GMT), reflecting a 4.4% increase from Friday's close of £66.97.

EU gas storage facilities were reported to be 64.7% full, based on data from Gas Infrastructure Europe (GIE). This figure is below the historical levels typical for this time of year, prompting concerns about the region's ability to refill storage ahead of the winter heating season. While milder weather forecasts for early September are expected to reduce immediate demand, low storage levels combined with uncertainty over LNG supplies from the Gulf are exerting upward pressure on prices.

Geopolitical tensions have further exacerbated supply concerns following recent military actions. The US military conducted strikes on Lark Island overnight, and Iranian media reported missile launches against targets in the region in response. These disruptions have heightened worries over LNG exports from prominent Gulf producers, particularly Qatar, thereby tightening the global LNG market.

A prolonged disruption in Gulf LNG exports could compel European buyers to compete more aggressively with Asian markets for available cargoes, potentially driving European gas prices even higher. Analysts indicate that the interplay of geopolitical risks, low European storage levels, and a constrained global LNG supply could maintain market volatility in the foreseeable future.