Geopolitical tensions and weather concerns drive energy prices as natural gas surges 16% in Europe amid US-Iran unease.
Oil Market Volatility
A Thursday rally in the oil market, where prices rose over 10% to above $66 per barrel for Brent crude, was halted. After reaching its highest level since October last year, prices fell by more than 4%.
There will be no US attack on Iran for now.
Trump’s Stance on Iran
This is the result of statements by President Donald Trump, who at a meeting with journalists on Wednesday evening declared that Iran has stopped killing protesters opposing the regime and will not execute people accused of attempting to overthrow the government.
We will watch this and see how the situation develops, Trump said when asked about the possibility of using military force against Iran.
US-Iran Tensions and Oil Supplies
Earlier, US media speculated that the US administration was considering attacks on targets in Iran to support the largest protests by Iranians against the authorities in Tehran in several years. Preparations included the evacuation of some US personnel from Al Udeid Air Base in Qatar. On Wednesday, Iran closed its airspace.
Escalating tensions between the US and Iran have raised investor concerns about oil supplies from the Middle East, which accounts for one-third of global raw material production. Hence the rise in prices at the beginning of January.
Long-Term Oil Price Outlook
In the longer term, experts expect continued declines in commodity prices. Last year, oil prices fell by 18-20% due to increased supply, and Brent crude prices dropped to a four-year low of $59 per barrel. Production, mainly in countries outside the OPEC+ cartel, is also expected to grow this year, pushing prices to even lower levels.
Natural Gas Surge in Europe
In the group of energy commodities at the beginning of 2026, natural gas prices in Europe are rising the fastest. Since the last December session, prices for the raw material, a key industrial and consumer heating resource, have risen over 16%. The price of natural gas with February delivery on the Dutch TTF market reached €32.8 per MWh, the highest level in two months.
Colder weather in much of Europe has increased demand for gas for heating, while unrest in Iran raises concerns about potential disruptions to LNG flows from the Persian Gulf. There is also a threat of disruptions in gas supplies from Iran to Turkey, analysts at ING wrote in a comment. Analysts emphasize that many investors were betting on falling prices, opening short positions on the natural gas market. To close these and protect against larger losses, they are forced to buy gas futures, thereby boosting prices.
Low Gas Storage Levels
Unease in the market is also fueled by relatively low gas storage levels. In Germany, it has dropped to around 50%, the lowest level at this time of year in history. After suspending supplies via pipelines from Russia, Germany is dependent on gas in the form of LNG. During the winter, the current inflow is insufficient to meet demand, so the raw material is being drawn from storage. Experts emphasize that there will be no gas shortage in Germany, though they will have to buy more raw material in the summer to fill storage before the next heating season.
Future Gas Price Decline
Despite recent increases, gas remains relatively cheap. In January 2025, the raw material cost 45-50 euros per MWh. In December, prices fell to 26.4 EUR/MWh, the lowest level in over a year and a half.
Similar to oil, natural gas prices should also decline in the long term. This will be determined by the expansion of infrastructure enabling increased gas supplies in the form of LNG, mainly from the United States and Qatar.
