European Gas Edges Higher to Secure Fourth Weekly Gain After Surpassing War-Era Highs
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European natural gas futures edged upward on Friday, stabilizing after a period of highly volatile trading. The benchmark contracts locked in their fourth consecutive weekly gain, remaining near the highest levels recorded since 2023 after recently surpassing peaks driven by geopolitical conflicts.
The front-month European gas contract registered a modest gain during the session, trading near 72.50 euros per megawatt-hour (MWh). This left the continental benchmark on course for a weekly increase of more than 8%.
In the United Kingdom, the equivalent gas contract held steady at approximately 179 pence per therm, securing a weekly rise of over 9% as British traders adjusted following Monday’s bank holiday.
This prolonged upward movement highlights the significant geopolitical risk premium now priced into forward energy curves. Market participants are adjusting winter supply expectations following military strikes between U.S. forces and Iran, which severely disrupted commercial shipping through the Strait of Hormuz earlier in the week.
Although the U.S. administration insists that international shipping channels remain open, satellite tracking shows that commercial traffic through the vital strait is running at only a small fraction of normal levels. This disruption poses a direct threat to roughly 20% of the world’s liquefied natural gas (LNG) supply, much of which comes from Qatar.
With U.S. President Donald Trump warning of stronger retaliatory measures against Iranian infrastructure, including potential strikes on Kharg Island, analysts see little chance of a near-term diplomatic resolution.
Consequently, European utilities are competing aggressively with Asian buyers to secure alternative Atlantic basin LNG cargoes, creating a high floor for global spot prices.
Low storage levels increase winter vulnerability
This geopolitical disruption occurs at a vital moment for European energy infrastructure as the region approaches the end of its summer storage injection season ahead of the winter demand peak.
According to Gas Infrastructure Europe, underground gas storage sites are currently filled to about 62% of capacity, falling short of the five-year average for this time of year.
Storage replenishment throughout August has been limited by a combination of high summer temperatures boosting gas-fired electricity generation in Southern Europe, scheduled maintenance on Norwegian offshore pipelines, and delayed shipments of Qatari LNG.
Rising energy costs keep European Central Bank on alert
The sustained increase in European natural gas prices, alongside crude oil prices holding steady above $90 a barrel, has renewed concerns over cost-push inflation in Europe’s industrial and retail sectors.
Rising energy costs are complicating the outlook for the European Central Bank (ECB) ahead of its Governing Council meeting on September 10. While Eurozone core inflation dropped slightly to 2.4% in early August data, headline CPI rose to 3.3% year-on-year, driven by a 14.3% jump in energy prices.
These persistent energy-related price pressures are keeping pressure on ECB policymakers to maintain a restrictive monetary stance, as they balance the threat of inflation expectations becoming unanchored against indications of weakening economic growth in the region.
