European natural gas prices could more than double if shipping through the Strait of Hormuz is halted for a month, according to Goldman Sachs Group, as geopolitical tensions in West Asia raise fresh concerns over global energy security
European natural gas prices could more than double if shipping through the Strait of Hormuz is halted for a month, according to Goldman Sachs Group, as geopolitical tensions in West Asia raise fresh concerns over global energy security.
In a note on Sunday, Goldman analysts led by Daan Struyven said benchmark gas prices in Europe and Asia have hardly priced in a meaningful risk premium linked to Iran. Roughly a fifth of the world’s liquefied natural gas (LNG) supply, primarily from Qatar, transits through the narrow waterway between Iran and Oman.
A one-month disruption could send European gas prices and spot Asian LNG up by as much as 130 per cent to around $25 per million British thermal units (mmBtu), the bank estimated.
“A hypothetical longer disruption of natural gas supply transit through the Strait of Hormuz lasting more than two months would likely lift European natural gas prices above €100 per megawatt-hour ($35/mmBtu) to trigger more significant global gas demand destruction,” the analysts wrote.
Risk premium still muted
The warning comes as markets remain on edge over escalating tensions involving Iran, Israel and the United States. While oil prices have rallied sharply in recent sessions, gas markets in Europe and Asia have yet to reflect a sustained geopolitical risk premium, Goldman said.
Dutch TTF gas, Europe’s benchmark, has remained well below the extreme levels seen in 2022 after Russia’s invasion of Ukraine, when prices briefly surged above $100/mmBtu equivalent. Goldman’s analysis suggests that a prolonged interruption at Hormuz could recreate a similar supply shock, particularly for Europe, which has grown increasingly reliant on LNG imports after curtailing Russian pipeline gas.
About 20 per cent of global LNG flows pass through Hormuz, making it one of the world’s most critical energy chokepoints. Any closure, even temporary, would disrupt shipments from Qatar, one of the largest LNG exporters globally, tightening supply in both Europe and Asia.
US impact seen limited
In contrast, the impact on US natural gas prices would likely be limited, Goldman said. The United States is a major net exporter of LNG, and its liquefaction facilities are already operating near full capacity, leaving little room to ramp up additional exports in the short term.
As a result, while global LNG benchmarks could spike sharply, US domestic gas markets may remain comparatively insulated.
Global oil prices surged nearly 10 per cent on Monday, climbing to multi-month highs, as escalating military confrontation between the United States, Israel, and Iran triggered fears of prolonged supply disruption through the Strait of Hormuz, a chokepoint that carries more than a fifth of the world’s oil.
Brent crude rose as high as $78.52 per barrel in early trade, reacting to the U.S. and Israeli strikes on Iran that reportedly killed Iran’s Supreme Leader, Ali Khamenei, and Tehran’s retaliatory attacks across the region. Markets are now pricing in a significant geopolitical risk premium, with analysts cautioning that elevated prices could persist for days or longer, depending on how quickly shipping flows normalise.
With inputs from agencies.
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