European Gas Prices Hit Three-Year High After Saudi Pipeline Strike

European natural gas prices reached their highest levels since December 2022 on Monday, driven by a series of supply shocks in the Middle East. Dutch benchmark futures jumped as much as 5.3% to 83.67 euros a megawatt-hour, while United Kingdom prices surged 4% to exceed 206 pence per therm.

The price spike followed a drone strike on the pumping infrastructure of Saudi Arabia's East-West pipeline, which forced the government to take the critical oil pipeline offline. Market volatility increased further due to advances by Yemen's Houthis and the postponement of a meeting between Iran and Gulf states intended to discuss the reopening of the Strait of Hormuz.

Europe enters the heating season with a fragile energy balance. Gas storage facilities are currently only 68% full, significantly below the 15-year average of 85%. This deficit is attributed to curtailed LNG supplies from the Persian Gulf, specifically from Qatar. While the European Commission stated there is no immediate risk to winter gas security, analysts warn that low inventories increase the risk of extreme price volatility if the region faces a cold snap or additional supply shocks at maritime chokepoints in the Gulf and Red Sea.