European gas prices surge as Qatar halts LNG production
European gas prices have soared dramatically after Qatar announced it was halting liquefied natural gas (LNG) production following an Iranian drone attack. The decision has intensified market turmoil already triggered by the escalating conflict involving Iran, the United States and Israel.
On Monday, the benchmark European gas price on the Dutch futures market initially opened 25 per cent higher, resulting in the largest single-day increase since August 2023. Later in trading, the rise remained above 20 per cent, pushing the price of a megawatt-hour of natural gas to over 38 euros. Following Qatar’s announcement, prices climbed even further, bringing the overall increase to nearly 40 per cent.
The surge comes amid severe disruption to energy flows through the Strait of Hormuz, a crucial transit route for oil and natural gas. Around 20 per cent of the world’s LNG supply passes through the strait. Shipping traffic there has almost ground to a halt as a result of Israeli and US strikes on Iran and subsequent Iranian counterattacks in the region.
Although most LNG transported through the Strait of Hormuz is destined for Asian markets, any interruption has global repercussions. Europe, in particular, is highly exposed. Since Russia’s invasion of Ukraine, European countries have become heavily reliant on LNG imports to replace lost pipeline supplies. With the heating season drawing to a close, gas storage facilities now need to be replenished, increasing sensitivity to supply shocks.
Gas prices had already risen sharply as flows of oil and gas through the strait were disrupted by the conflict. Qatar’s decision to suspend LNG production has added further pressure, fuelling fears of prolonged shortages.
Analysts warn that the longer the conflict continues and the Strait of Hormuz remains effectively closed, the steeper the price increases are likely to be. Experts at investment bank Goldman Sachs predict that if the strait remains shut for a month, European gas prices could double.
Ras Laffan Industrial City is Qatar's principal site for production of liquefied natural gas and gas-to-liquid. © AFP PHOTO/STR
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