European gas logs 12% weekly surge as U.S.-Iran diplomatic hopes collapse

European gas prices surged by 12% weekly on Friday, driven by the collapse of U.S.-Iran diplomatic talks and new military strikes in the Persian Gulf. The benchmark contract climbed 4.2% to 96.18 euros per megawatt-hour. Across the Atlantic, the British equivalent rose 3.8% to 239 pence per therm. The sharp Friday rally ensured a 12% weekly increase for both markets.

The European gas market has now detached from global benchmarks, which were on track for a second consecutive weekly loss due to oversupply concerns. The rush to secure winter supply security was triggered by Washington's decision to abandon Iran negotiations. President Donald Trump announced on Thursday that the U.S. no longer required an agreement with Tehran, citing its existing financial leverage over Iran and control of the Strait of Hormuz.

He instructed Vice President JD Vance to abandon talks and focus on domestic matters. Washington also reiterated its strict naval blockade of Iranian trade and oil shipments, alongside existing economic sanctions. The volatile week also saw retaliatory strikes by Yemen's Iran-backed Houthis and fresh attacks on crude tankers in the Gulf, escalating the threat to energy infrastructure.

Despite EU gas storage sitting at 71% capacity, the geopolitical risk premium has risen, forcing traders to price severe risks into forward winter contracts, fearing a regional war could disrupt critical LNG transit routes as heating season begins.