The cost of gas in Europe continues to show significant increases, and as of Tuesday, prices have nearly doubled compared to levels before the recent attacks by the US and Israel on Iran. Despite this, the governments of European Union countries emphasize that the situation is under control and are taking all necessary measures to stabilize the market.
This is reported by Finway
Geopolitical Tension and Its Impact on the Gas Market
The main reason for the price spike has been the escalation of tensions in the Middle East. In particular, Iran warned yesterday that it would “burn” any vessel attempting to cross the Strait of Hormuz — one of the key routes for transporting energy resources in the world. This led to the price of gas under the TTF forward contract exceeding 58 euros per megawatt-hour. For comparison, just a week ago, a similar volume of gas cost 31 euros per MWh.
Additional pressure on the market was caused by the shutdown of the largest liquefied natural gas (LNG) plant in Qatar following an Iranian drone attack. As a result, the facility temporarily lost its ability to supply LNG to global markets, where its share typically accounts for about 20% of the total volume.
Europe’s Response and Energy Diversification
European countries, which receive nearly half of their imported gas in the form of LNG, are reassuring the public by stating that the situation is under control. According to French Energy Minister Roland Lescure, a “crisis group has been established that meets once a day.” Crisis mechanisms have also been activated in Germany, and in Brussels, energy experts from EU embassies are continuously monitoring developments in the market.
Thanks to supply diversification and reduced dependence on Russian pipeline gas, the EU has shifted towards maritime LNG supplies. This has helped stabilize energy security; however, it has made Europe more vulnerable to global maritime risks. Qatar currently accounts for approximately 12–14% of European LNG imports.
“Europe is much less dependent on oil and LNG from the Persian Gulf than China, India, Japan, or South Korea, but it is not isolated,” states a report from the Brussels think tank Bruegel.
Blocking the Strait of Hormuz could lead to an immediate rise in oil and LNG prices in global markets, which would negatively impact Europe, even under conditions of limited direct supplies from the region. Currently, the level of gas storage in the EU is about 30%, which is lower than last year’s figures.