European Gas Edges Higher After Rocky Start to Iran Peace Talks

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(Bloomberg) — European natural gas edged higher after talks between the US and Iran appeared to get off to a shaky start, with President Donald Trump issuing fresh threats even as discussions on a peace deal proceed.

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Benchmark futures rose as much as 3.9% after Trump threatened to launch additional strikes if Hezbollah keeps attacking Israel. They pared gains over the course of Monday morning as mediators cited “encouraging progress” in peace negotiations. Traders were also watching developments in major LNG exporter Qatar, where a domestic gas plant experienced a malfunction that injured dozens.

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The memorandum of understanding signed by the US and Iran last week with the aim of ending the war was tested over the weekend after Iran claimed to have closed the Strait of Hormuz, accusing Israel of violating a ceasefire in Lebanon. The waterway’s near-closure in the months since the war began has cut off around a fifth of global liquefied natural gas supply, piling pressure on Europe to compete with other buyers as it refills its inventories. 

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Qatar and Pakistan, which are mediating discussions in Switzerland, said parties established a communication line to avoid incidents and miscalculations, with the aim of ensuring safe passage for commercial vessels through the Strait of Hormuz. They agreed on a roadmap toward reaching a final deal within 60 days and technical-level discussions will continue this week. 

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“As we move deeper into the injection season and closer to the 2026/27 winter, the European gas market will become increasingly sensitive to developments in the Middle East,” ING Groep NV strategists Warren Patterson and Ewa Manthey wrote in a note. The recent tensions in the region show that “a more permanent deal will be challenging, with very real risks of a flare-up in hostilities during the 60-day ceasefire.”

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Meanwhile, Sunday’s incident in Qatar underscored the risks to the region’s energy facilities as they ramp up production after the US-Iran ceasefire. A blast occurred during the startup of the Ras Laffan industrial complex, with the explosion and fire hitting the Barzan local gas supply facility, and it’s unclear if LNG output will be affected.

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This week’s heat wave in Europe is also expected to boost short-term energy consumption in some countries where air-conditioning demand is strong. Seasonal temperature records are likely to be toppled across many European cities, including London and Paris. 

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Dutch front-month futures, Europe’s gas benchmark, traded 1.2% higher at €42.60 a megawatt-hour by 9:14 a.m. in Amsterdam. 

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