European and British wholesale natural gas futures rebounded on Tuesday, rising 1.6% each as energy desks locked in profits and recalibrated risk premia following a steep early-week sell-off driven by diplomatic headlines out of New York.

The benchmark Dutch front-month TTF contract advanced 1.6% to trade around 78.80 euros per megawatt-hour (MWh), recovering from a near two-week low touched during the previous session.

In Great Britain, the equivalent NBP wholesale gas contract similarly climbed 1.6% to trade around 195.40 pence per therm, matching the continental bounce.

Both Dutch and British contracts plummeted over 7% on Monday, recording their worst single-day drop in nearly two months.

The heavy liquidation was triggered by news that U.S. President Donald Trump voiced openness to holding bilateral discussions with Iranian President Masoud Pezeshkian, who is attending the UN General Assembly in New York this week.

The prospect of re-initiating direct U.S.-Iran talks sparked immediate hope across commodity bourses that an exit ramp could be found to end the seven-month Middle East war, deflating extreme transit risk premia across the Strait of Hormuz.

However, energy desks dialed back initial optimism on Tuesday morning, recognizing that a diplomatic breakthrough remains far from guaranteed while physical supply flows through Persian Gulf choke points remain severely constrained.

While gas contracts staged a modest recovery, broader energy bourses provided a steadying hand as physical shipping workarounds continue to scale up.

Brent crude futures inched lower on Tuesday following a 3% decline in the prior session, aided by reports that energy majors and maritime operators are successfully utilizing overland pipelines and alternate ship-to-ship loading routes off Oman to bypass Persian Gulf transit bottlenecks.

Adding to market anxiety, the European Central Bank cautioned in an Economic Bulletin that post-2022 market liberalisation means wholesale gas price surges now pass through to retail inflation within 1 to 3 months across more than half of euro area economies.

Source: Investing.com