EU Gas Futures Jump due to Risk of War Escalation in Gaza

Gas futures jumped in Europe amid the escalation of the war in Gaza, which threatens to spread into a full-scale conflict.

Contracts traded in the Netherlands, seen as a main benchmark for the European market, rose by about 6% early on Wednesday, after fears worsened about destabilization in the Middle East following the US bombing of Iraqi targets, as well as new attacks launched by Houthi militias on ships in the Red Sea. 

Although the impact of rerouting ships has not yet been clearly seen on supplies, the market is still in a state of alert and anticipation due to the potential risks to the main transportation routes for energy exports. Some ships transporting liquefied natural gas (LNG) cargoes changed their course, heading for longer journeys that could last more than a month, while avoiding the Red Sea, according to Bloomberg.

However, gas prices in Europe have moved within a relatively narrow range over the past days, and are trending to decline by more than 50% since the beginning of this year. The rise in fuel stocks and the relative decline in demand have strengthened confidence in the continent's ability to pass the current heating season easily.

It is expected that the moderate weather will continue in most parts of Europe until the beginning of January, which means a decline in demand for gas used in heating. Some countries took advantage of this to replenish fuel stocks during Christmas, while Germany, Austria, Belgium and Denmark were among the countries that recorded a slight increase in gas stocks on Monday.

Gas contracts for January delivery in the Netherlands rose by 5.6% to €36.08 per megawatt, while the equivalent contracts in the United Kingdom rose by 5.7%.

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