European wholesale gas prices jumped to their highest level in more than a month on Friday after reports that the Strait of Hormuz, a critical chokepoint for global energy supplies, had been closed. The Dutch TTF front-month contract, the benchmark for European gas trading, rose by more than 6% during morning trading, reaching levels not seen since mid-June.
The Strait of Hormuz, located between Oman and Iran, is a vital passage for liquefied natural gas (LNG) tankers from Qatar, one of the world's largest LNG exporters. Any disruption to this route threatens to tighten European gas supplies just as the continent begins refilling storage facilities ahead of winter. Analysts at energy consultancy ICIS said the closure 'adds a significant risk premium to the market, particularly given the already fragile supply-demand balance in Europe.'
UK natural gas prices, which are closely linked to the Dutch TTF, also spiked. The UK NBP day-ahead contract rose sharply, reflecting fears that Britain could face higher import costs for LNG cargoes. The UK relies on gas for around 40% of its electricity generation and for heating millions of homes. Higher wholesale prices typically feed through to household energy bills, though the full impact depends on how long the disruption lasts.
Investors reacted by rotating into energy stocks. Shares in BP and Shell edged higher in early London trading, while utility companies such as Centrica saw gains. The broader FTSE 100 index was broadly flat, with energy gains offsetting weakness in consumer-facing sectors. The FTSE 100 was last trading at 8,201, down 0.1% on the day.
For UK pension holders and investors with exposure to multi-asset funds, the gas price surge underscores the ongoing volatility in energy markets. Analysts at Investec warned that 'prolonged disruption at Hormuz could reignite inflationary pressures in the UK, complicating the Bank of England's rate-setting decisions.' No immediate comment was available from the UK Department for Energy Security and Net Zero.