Key insights
- European natural gas prices are showing volatility due to ongoing Middle East tensions, particularly concerning the Strait of Hormuz, a critical energy chokepoint. While demand remains stable and LNG send-out is increasing, the lack of a ceasefire in Lebanon and potential disruption to oil and LNG shipments could lead to broader energy price increases globally. This could indirectly impact US inflation and corporate costs, suggesting a slightly bearish outlook for US equities.
Investing.com - European natural gas prices edged lower on Friday, but remained on track for weekly gains, as investors assessed ongoing tensions in the Middle East.
The benchmark Dutch front-month contract at the TTF hub was last down by 0.3% at 48.605 euros per megawatt hour, reflecting steady demand and higher send-out of liquefied natural gas, according to ICE data. British natural gas futures also dipped by 0.7% to 117.13 pence per therm.
Hovering over sentiment was Hezbollah’s rejection of a ceasefire between Israel and Lebanon, which has cast fresh doubt around the possibility of a U.S.-Iran peace deal.
Tehran, which is aligned with Hezbollah militants, has made a cessation in fighting in Lebanon a key demand in peace negotiations with Washington. The U.S. and Israel launched a joint assault on Iran in late February that has since spread to include other areas of the Middle East, including Lebanon.
In a statement, Hezbollah’s leader described the U.S.-brokered agreement between Israel and Lebanon earlier this week as "absurd, humiliating, and insulting."
According to the Associated Press, the Hezbollah announcement came as Israeli attacks killed at least four people. Lebanese troops moved into areas of southern Lebanon on Thursday which have been the scene of intense fighting for months, the AP said, citing state media.
Crucially, the lack of a deal has left the Strait of Hormuz, a vital waterway for a fifth of the world’s oil and liquefied natural gas, effectively closed to tanker traffic, crimping global supplies. Energy prices have risen sharply compared to pre-war levels as a result.
Still, demand is anticipated to remain nearly flat despite a marginally cooler temperature revision for next week, Reuters reported, citing LSEG data. Liquefied natural gas send-out is forecast to rise by 100 gigawatt hours per day to 1,817 GWh/d on Friday due to new cargo arrivals in Belgium and Germany, Reuters added.
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