Key insights
- European natural gas prices fell sharply on news of a US-Iran ceasefire, easing concerns about supply disruptions through the Strait of Hormuz. While primarily impacting European markets, reduced energy price volatility globally could have a slightly positive influence on US equities by alleviating inflationary pressures.
Investing.com - European natural gas prices slumped on Wednesday, with markets optimistic that supply issues resulting from the conflict in Iran could be resolved after a ceasefire was reached between U.S. and Iran.
The benchmark Dutch front-month contract at the TTF hub plummeted by 17.3% at 44.03 euros per megawatt hour by 10:34 ET (2:34 GMT), according to ICE data. It was the biggest fall in more than a month.
Many European countries use natural gas exported from producers in the Persian Gulf, particularly Qatar, although flows have been dented by Iranian attacks on energy infrastructure in the region in recent weeks. Market observers are expected to remain watchful of LNG carriers that might try to cross the strait. Earlier this week, two LNG carriers from QatarEnergy (QE) turned around after nearing the Strait of Hormuz, reversing what could have been the first LNG shipments through the waterway since February 28, according to Kpler ship-tracking data.
Shipping firms said they would need further assurances of safety before sailing. "Any decision to transit the Strait of Hormuz will be based on continuous risk assessments, close monitoring of the security situation, and available guidance from relevant authorities and partners," said container shipper Maersk, according to a report from Reuters.
On Tuesday, the U.S. and Iran reached a deal to temporary halt hostilities for two weeks. U.S. President Donald Trump had earlier threatened to eradicate Iranian "civilization" if the country did not open the Strait of Hormuz by 8 p.m. Eastern on Tuesday.
Trump said on social media that the truce followed conversations with leaders from Pakistan, which has served as a mediator between the U.S. and Iran. He added that the U.S. received a 10-point proposal from Iran which provides a workable basis for negotiations, and reiterated his claims that Washington had "already met and exceeded all Military objectives" and the "two week period will allow the Agreement to be finalized and consummated."
Iran’s foreign minister, Abbas Araghchi, said Tehran would "cease their defensive operation" and would make "safe passage" through the Strait of Hormuz possible if shipping is done in coordination with the Iranian military. Pakistani Prime Minister Shehbaz Sharif invited U.S. and Iranian officials to Islamabad for talks on Friday. Vance did not specify if he would be attending the negotiations, but said Trump is "impatient to make progress" in the discussions.
Israel, who launched a joint assault on Iran with the U.S. in late February, backed Trump’s decision, Prime Minister Benjamin Netanyahu’s office said in a statement. However, the comment did not include Lebanon, where Iran-aligned Hezbollah militants have been targeted by Israel.
The agreement offers some space for both sides to hash out a long-term peace deal, halting a war which, beyond the military and humanitarian costs, many observers feared was on track to drive up inflationary pressures and weigh on the global economy.
Still, media reports have said new military and drone strikes hit areas in the Persian Gulf on Wednesday morning.
Jaiveer Shekhawat contributed to this article.