European energy markets face volatility as natural gas prices jump 16% amid geopolitical tensions and weather concerns.
Oil Prices Volatile Amid Iran Tensions
On Thursday, a rally in the oil market saw prices of the commodity increase by over 10%, surpassing $66 per barrel of Brent grade, before being interrupted. After reaching the highest level since October of last year, prices fell by more than 4%.
A US attack on Iran will not occur for now, which is the result of statements by President Donald Trump, who at a meeting with journalists on Wednesday evening stated that Iran has stopped killing demonstrators opposing the regime and will not carry out executions on people accused of attempting to overthrow the government.
Gas Prices Surge in Europe
In the group of energy raw materials at the beginning of 2026, natural gas prices in Europe are rising fastest. Since the last December session, prices of the raw material, one of the key ones from the perspective of industry and heating bills paid by consumers, have increased by over 16%. The price of natural gas with February delivery on the Dutch TTF market reached 32.8 euros per MWh, the highest level in two months.
Colder weather in much of Europe has increased demand for gas for heating, while concerns in Iran raise fears of potential threats 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 commentary. Analysts emphasize that many investors were betting on falling gas prices, opening short positions on the natural gas market. To close them and protect against larger losses, they are forced to buy gas futures contracts, thereby pushing up prices.
Low Storage Levels Exacerbate Concerns
Concern in the market is also exacerbated by the relatively low level of gas storage. In Germany, it has fallen to around 50%, the lowest level at this time of year in history. After gas supplies via pipelines from Russia were suspended, Germany is dependent on gas supplies in the form of LNG. During the winter period, 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, although they will have to buy more raw material in the summer to fill storage before the next heating season.
Long-term Outlook for Energy Prices
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 crude oil, the price of natural gas should also fall in the long term. The expansion of infrastructure enabling increased gas supplies in the form of LNG, primarily from the United States and Qatar, is expected to determine this outcome.
