European natural gas prices climbed to their highest level in five months on Friday as escalating tensions between the U.S. and Iran reduced the prospects for resumed diplomatic efforts and slowed the replenishment of regional storage inventories ahead of winter.
The front-month European gas futures contract advanced 1.6% to €66.75 per megawatt hour, marking a fresh five-month high. Over the past week, the contract has surged nearly 10%, reflecting tightening supply conditions in a market already grappling with constrained storage levels.
According to data from Gas Infrastructure Europe, European gas storage facilities were 61.82% full as of the latest assessment. Analysts at Morgan Stanley warned that the window for restoring inventories to adequate pre-winter levels is effectively closed, increasing the likelihood of a tight start to the heating season. Even if geopolitical tensions ease in the coming months, prices are expected to remain supported through the second half of the year, the bank noted.
The diplomatic impasse follows the expiration of a preliminary U.S.-Iran peace agreement earlier this week, with neither side indicating plans to revive negotiations. U.S. President Donald Trump has since threatened to escalate sanctions against Iran, further constraining the flow of liquefied natural gas (LNG) through the Strait of Hormuz—a critical chokepoint that typically handles about one-fifth of global LNG shipments.
The disruption to LNG transit through the Strait of Hormuz has compounded existing supply concerns, as European storage levels remain insufficiently replenished despite gradual weekly increases. With heating demand set to rise in the coming months, the combination of geopolitical risk and depleted inventories has heightened price volatility and raised the specter of supply shortages.
