European gas prices edged up on Friday, reaching their highest point in four months as concerns over supply disruptions persist. The Dutch TTF front-month contract, a key benchmark for European gas, rose 0.4%, while the British equivalent ticked up 0.3%. Prices are on track for a rare fourth consecutive week of gains, a streak unseen since May 2025, with an 8% jump just this week and a surge exceeding 42% during July.

Supply Risks and Storage Shortages

Equinor, the continent’s leading domestic gas producer, reported that storage levels are hovering around 54% capacity, which is well below the five-year seasonal average and marks the second-lowest in 15 years. The company’s CEO warned that Europe is unlikely to meet its 80% gas storage target before the heating season begins. This shortfall raises the risk of sharp price hikes if the winter turns colder than expected.

Meanwhile, geopolitical tensions in the Middle East continue to tighten global gas supplies. The United States has launched 13 consecutive nights of strikes on Iran, targeting its allies including Yemeni Houthis. These actions have disrupted shipments through the Strait of Hormuz, a key chokepoint for liquefied natural gas (LNG) exports from the Persian Gulf.

Asian buyers have been outbidding European importers for LNG cargoes, lured by limited supply, further squeezing Europe’s access to vital gas shipments at a vulnerable time. Compounding the issue, soaring temperatures across Europe have boosted electricity demand for cooling, pushing gas consumption higher.

The ongoing conflict has also sharply increased insurance costs for vessels navigating the southern Red Sea, with prices doubling overnight after Houthi attacks on tankers. This escalation in war risk premiums adds another layer of pressure on energy logistics in the region.

Rising energy costs are feeding inflation pressures across Europe, complicating prospects for central banks that might have counted on easing interest rates. The persistence of high fuel prices could force regulators to maintain tighter monetary policies for longer, as inflation driven by energy costs shows little sign of abating.

material is for informational purposes only and does not constitute financial advice