European gas prices spike on Hormuz blockade fears

European natural gas prices jumped after the United States vowed to blockade all vessels passing through the Strait of Hormuz that had called at Iranian ports or were headed there.

Benchmark futures rose as much as 18% during Asian trading hours before paring some of the gains as European market participants entered the market. Trading hours for the contracts were also expanded to 21 hours from 10 on April 13, Bloomberg reports.

The United States and Iran failed to reach an agreement after marathon peace talks in Pakistan over the weekend, raising doubts over whether the two sides can find a lasting resolution to a six-week conflict that has disrupted about 20% of the world’s liquefied natural gas supply. US forces are set to begin implementing the blockade — which does not apply to other ships transiting the contested waterway — from 10 a.m. New York time on April 13.

“The US blockade of Iranian traffic through the Strait of Hormuz will likely lead Iran to enforce its own blockade even more strictly, meaning that the global market will increasingly be missing LNG from the Persian Gulf,” said Arne Lohmann Rasmussen, chief analyst at Global Risk Management. “This intensifies competition between Asia and Europe and points towards higher prices today.”

By Vafa Guliyeva