After three weeks of fragile calm in the Middle East following the signing of the memorandum of understanding between the US and Iran, markets were given a fresh injection of bullishness this week as the US and Iran exchanged strikes. The Winter 26 gas contract gained 10p/th between close on 2nd July and the morning of the 9th. Its power counterpart saw similar gains, surging from £98.90 to £104.50/MWh over the same period.
While Iranian threats to shipping had not reliably ceased in the immediate wake of the MoU signing, this week saw material escalation. Qatari LNG vessel Al Rekayyat was struck in the early hours of Tuesday morning, while travelling fully laden and without its transponder on. An IRGC missile apparently struck the port side of the vessel and started a fire in the engine room. A direct strike on a Qatari LNG vessel represents a fresh challenge to exports from the world’s 2nd largest LNG producer, which – according to Italian utility Edison – has already extended force majeure to September. Another Qatari LNG tanker, the Al Areesh, turned back towards Qatar after the incident, having been signalling for Pakistan.
In response, the US carried out two days of strikes against Iranian targets. US Central Command has stated that around 90 targets have been struck, with the aim of further degrading Iran’s ability to attack commercial shipping in the Strait. CENTCOM issued a statement saying targets included air defence systems, coastal surveillance assets, missile and drone storage sites, naval capabilities, and military logistics infrastructure. This follows strikes on 80 targets the previous day. In context, speaking after the first month of the war, CENTCOM said it had struck over 11,000 targets as well as damaging or destroying over 150 vessels.
European gas storage fullness crossed the 50% threshold this week, but remains well below historical year-on-year levels. Recent analysis suggests Europe may not even reach 70% fullness before the start of the Winter 26 heating and gas withdrawal season, leaving less buffer against a cold winter, and creating more scope for volatility in gas and power prices.
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