European natural gas prices extended a five-day rally on Tuesday as a military escalation in the Persian Gulf brought tanker traffic through the Strait of Hormuz to a halt. Dutch and UK benchmarks posted their longest winning streak since late July, while EU storage sits at a historic low for mid-August and Germany's own reserves are running even thinner.
European gas benchmarks climbed for a fifth straight session on Tuesday as a total shutdown of tanker transit through the Strait of Hormuz deepened fears of a severe winter supply crunch. Dutch front-month futures gained 1.8% to 62.8 euro per megawatt-hour. British wholesale gas contracts rose 1.2% to 154.4 pence per therm, marking both benchmarks' longest daily winning streak since late July.
The escalation traces back to a collapse in diplomacy. Reuters reported that Tehran shifted to a fully offensive military posture after talks on a permanent peace deal broke down and Washington ruled out extending a temporary ceasefire framework. The move follows threats from U.S. President Donald Trump over the weekend to enforce a naval blockade or take military action against interference with regional transit.
Hormuz freeze strands LNG cargoes
Commercial traffic through the Strait of Hormuz fell to a standstill over the weekend, stranding Qatari LNG tankers and delaying spot deliveries bound for European terminals. As a result, European utilities are now competing directly with Asian buyers bidding up spot LNG cargoes to secure winter fuel supplies.
EU storage at a historic low
Data from Gas Infrastructure Europe shows EU underground storage caverns stand at just over 60% of capacity, a historic low for mid-August. Summer heatwaves lifted power demand for air conditioning, and reduced LNG inflow has slowed the seasonal injection process. Trading desks worry the bloc will enter the heating season with thin buffers unless physical LNG flows resume.
Germany's tank is emptier still
Germany's position is more fragile than the EU average. According to UBS macro strategist Simon Penn, German storage is only around 48% full, dramatically below both last year's level and the buffer Germany carried into the 2022 energy crisis. UBS economist Felix Huefner expects storage to reach roughly 65% by November, still short of government ambitions.
That shortfall opens several risks, UBS warns: stronger German buying could push wholesale gas prices higher, government-backed replenishment could worsen Berlin's fiscal position, or Germany could effectively elbow other European buyers aside in the scramble for supply. Low water levels on the Rhine near Kaub add a second squeeze, with shipping groups warning that commercial traffic could effectively be severed across a critical stretch of the river. Berlin is planning a strategic gas reserve, but its first filling is not expected until summer 2027, offering little immediate protection this winter.
Weather now decides which way this breaks. A mild winter could let the storage gap pass quietly, but a prolonged cold spell would turn thin buffers into a bidding war overnight, adding fresh inflation pressure just as Europe hopes price growth keeps cooling.
Sources: Investing.com, Investing.com
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