European gas jumps 3% as Middle-East talks hits stalemate

European and British wholesale natural gas prices surged on Monday, reversing last week's decline, as stalled Middle East trade talks and a rise in crude oil prices sparked concerns of ongoing disruptions in continental energy markets. The Dutch benchmark front-month contract increased by 2.8% to 74.10 euros per megawatt-hour (MWh), reversing some of Friday's significant losses.

In the United Kingdom, the corresponding day-ahead contract mirrored the continental rise, climbing 2.7% to 184.75 pence per therm. Geopolitical tensions halted profit-taking on Monday following an 8% weekly decline in European gas futures, their lowest weekly performance since mid-June. This decline occurred as traders locked in profits and monitored alternative shipping routes avoiding Persian Gulf choke points.

However, the diplomatic lull ended over the weekend when U.S. President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and end regional hostilities. Tehran maintained its stringent conditions for resolving the issue, causing Brent crude to jump past $106 a barrel and prompting energy traders to reinstate risk premia in near-term gas contracts.

Storage deficits and the winter heating season are looming, with Gas Infrastructure Europe reporting that underground storage caverns in the European Union are around 11 percentage points below inventory levels from the same period last year. With global LNG supplies facing transit challenges and Asian spot demand vying for flexible cargoes, any abrupt cold spell could result in rapid inventory depletion and trigger another upward move in wholesale energy prices.