European and UK natural gas prices experienced a dramatic surge in early trading on Thursday, driven by a significant escalation of military attacks on key energy infrastructure in the Middle East.

Price Movements and Market Impact

The European TTF benchmark rose by 25% on Thursday morning, reaching over €68 per MWh, its highest level since early 2023. This follows a 67% increase the previous week alone, bringing the benchmark's year-to-date gain to more than 140%. Similarly, UK gas prices increased by 24% to 172 pence per therm. The impact on gas markets has been more pronounced than on oil, despite a 6% rise in Brent crude, due to Qatar's critical role as one of the world's three largest LNG exporters.

Triggering Events: Escalation of Attacks

The price spike is a direct response to a series of retaliatory strikes on liquefied natural gas (LNG) and gas facilities. The escalation began with an Israeli attack on Iran's South Pars facility, the world's largest gas field, on Wednesday. Iran then launched retaliatory strikes on multiple QatarEnergy LNG facilities in Qatar. QatarEnergy confirmed on Wednesday that its Ras Laffan Industrial City facility sustained "extensive damage" from a missile. Further strikes occurred on Thursday, targeting several LNG facilities and causing "sizeable fires and extensive further damage," including at the Pearl GTL facility.

Analyst Perspective

Analysts note that Iran's retaliatory attacks on neighboring countries' energy assets are a primary concern for the gas market. They characterize the decision to strike Iranian energy assets as "odd," given recent U.S. efforts to ease upward pressure on oil prices. The attacks on energy infrastructure override these diplomatic efforts and, especially amid a cycle of retaliation, indicate potential for additional price increases.