Investing.com – European wholesale natural gas prices surged nearly 3.5% on Monday, climbing to their highest levels since March 23, as a fresh escalation in the Middle East conflict reignited deep fears over global liquefied natural gas (LNG) supply disruptions.

The Dutch front-month contract, the European benchmark, jumped 3.45% to trade higher by mid-morning, while the equivalent British wholesale gas contract mirrored the gains, rising 3.52%.

The price spike follows reports that a commercial tanker caught fire in the critical Strait of Hormuz chokepoint following a strike.

The Strait of Hormuz remains the world’s most critical maritime energy artery, carrying roughly one-fifth of global LNG volumes, principally from major Gulf suppliers.

European energy markets are hyper-sensitive to any threat of a Persian Gulf blockade.

Following the structural loss of Russian pipeline gas over the last few years, the continent has relied heavily on flexible seaborne LNG to heat homes and power industrial manufacturing.

The escalating maritime crisis comes at an incredibly delicate time for European utilities, as the 2.2% spike in global crude oil prices has pulled oil-indexed gas contracts higher in tandem.

Traders note that even though global LNG shipments are still physically passing through the strait under heavily guarded conditions, the threat profile has entirely transformed.

The mere mention of active security threats and ships on fire means insurance underwriters are demanding exorbitant war-risk premiums, a cost that is being instantly priced into the European curve.

Source: Investing.com