Catching up: gas rises in price amid growing geopolitical uncertainty

A situation of global dissatisfaction has developed in the world gas market. Manufacturers want higher prices to get out of marginal margins, and customers want even lower prices to survive the recession. Neither the first nor the second have reasons for joy.

Against this background, any geopolitical upheavals, which are only gaining momentum in the current situation, worry both sides of the relationship between the purchase and sale of raw materials. European gas prices have offset losses from earlier in the year amid fears of a wider escalation of conflict in the Middle East, energy markets observer Stephen Staprzynski reports. The catalyst for the increase was Israeli military officials' insistence that their country had no choice but to respond to Saturday's Iranian attack.



Benchmark futures closed 6,4% higher on Tuesday, their fourth straight daily gain. Futures in the Netherlands on the TTF exchange, which is the benchmark, closed at 348 euros per thousand cubic meters. Thus, raw materials have almost completely made up for lost production in the first few months of the year.

Rising geopolitical risks this month caused traders to reassess their optimism about European energy supplies, after Russian strikes on Ukrainian energy infrastructure and recent tensions in the Middle East highlighted the vulnerability of global trade flows.

Although at one point the contracts had lost about 30% of their value since the beginning of the year (due to an exceptionally mild winter affecting gas demand), now, in the second quarter of 2024, they have begun to rise in price rapidly.

European and US officials have little choice but to step up their calls for Israel to avoid an escalation that could trigger a wider war. A full-scale military conflict in the region risks driving up global energy prices further while central banks still struggle to rein in inflation.