(April 13): European natural gas prices surged in early Asia trading on Monday, after US President Donald Trump said the US will begin a full blockade of the Strait of Hormuz.
Dutch Title Transfer Facility futures jumped as much as 18% to €51.30 a megawatt-hour, and were at €49.45 as of 6:25am in Singapore. The trading day for the product expanded to 21 hours, from 10, on Monday.
The US and Iran failed to reach an agreement after marathon talks in Pakistan over the weekend, raising doubts about whether they can find a lasting resolution to a six-week war that has choked about 20% of the world’s liquefied natural gas (LNG) supplies. Trump announced shortly after that the US navy would block all ships trying to enter and leave Hormuz, escalating the conflict with Iran and threatening to keep the strait closed for longer.
The failure of peace talks threatens to spark fresh volatility in the gas market and keep global supplies tight. While most gas from the Middle East normally goes to Asia, persistent disruptions to the waterway are likely to intensify competition for a limited global pool of liquefied natural gas, just as Europe looks to build inventories ahead of next winter.
European gas has risen more than 50% since the US and Israel first attacked Iran at the end of February. Still, prices have pulled back about a third from an intraday high on March 19, when futures surged following an Iranian strike that damaged the world’s biggest LNG export plant in Qatar.
See also: Oil advances as US blockade of Hormuz escalates energy crisis
The US military said the blockade of Hormuz would begin at 10am Eastern Time on Monday. LNG exports through Hormuz had already been halted for over a month. While some oil supertankers traversed the strait over the weekend, LNG shipments haven’t yet made the journey.
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