Europe Gas Jumps After Seized Vessel in Red Sea Stirs War Fears

(Bloomberg) -- European natural gas prices jumped after a vessel seized in the Red Sea by Iran-backed Houthi rebels renewed concerns that the Israel-Hamas war could affect vital waterways for the fuel.

Benchmark futures increased as much as 6.9%, halting a four-day run of declines, after Japan’s Nippon Yusen KK said that a car carrier it chartered was taken in the southern part of the Red Sea on Sunday. 

The vessel, known as Galaxy Leader, is beneficially owned by a unit of Israeli businessman Rami Ungar’s Ray Shipping Group, according to data compiled by Bloomberg. In early 2021, another of his ships was struck by an explosion near the Strait of Hormuz.

Traders and analysts have warned that if the conflict in the Middle East widens it could severely disrupt fuel flows in the region, which is home to one of the world’s busiest shipping routes. Tankers from Qatar, a top exporter of liquefied natural gas, regularly pass through the Red Sea on the way to Europe. 

“At present anything that might conceivably be a problem seems to cause a price increase,” said Jonathan Stern, a distinguished research fellow at the Oxford Institute for Energy Studies. “Potentially the conflict could widen and that could potentially disrupt flows from Qatar to Europe, but at present there’s no sign of anything like this happening.”

While Iran denied involvement in Sunday’s incident, a spokesperson for the Houthi group said that it would continue to target Israeli ships until the military operation against Hamas ends. Israeli Prime Minister Benjamin Netanyahu’s office condemned the seizure. 

Europe has headed into winter with full storage sites and ample LNG imports, but an escalation could threaten its delicate supply balance. The continent remains vulnerable after last year’s energy crisis saw Russia curb pipeline gas flows.

Prices for the fuel were also supported by colder weather forecasts and higher crude prices ahead of an OPEC+ meeting later this week. Oil edged higher on Monday, though wasn’t as affected by the vessel attack.

Dutch front-month futures, Europe’s gas benchmark, were up 4.3% to €47.00 a megawatt-hour at 9:52 a.m. in Amsterdam. 

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