(Bloomberg) -- European natural gas prices slumped after a report that Israel is willing to avoid striking oil and nuclear targets when it retaliates against Iran for a recent attack.
Benchmark futures tumbled as much as 4.2% on Tuesday, the most in almost a month. Brent crude oil — which some gas contracts are tied to — fell as much as 4.1% as concerns over potential supply disruptions eased.
The Washington Post reported that Prime Minister Benjamin Netanyahu told US President Joe Biden’s administration he is willing to strike military rather than oil or nuclear facilities in Iran. Later, Israel said it’s listening to US misgivings about its planned counter-strike against Iran but will act based on its own assessments.
For gas, a vital fuel used for heating in Europe’s winter season, an escalation in the Middle East conflict would likely see energy-hungry nations such as Egypt affected, raising global competition for cargoes. A key risk would be a closure of Strait of Hormuz, which transits around one-fifth of global liquefied natural gas.
Global supply of gas will remain limited for at least another two years after the construction of key new plants has been delayed. In addition, Europe is set to lose a large chunk of its remaining pipeline flows from Russia once a transit deal with Ukraine expires at the end of the year, unless an alternative supply agreement is hashed out.
Dutch front-month futures, Europe’s gas benchmark, fell 2.0% to €39.74 a megawatt-hour at 9:07 a.m. in Amsterdam.
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