Europe is facing major economic trouble due to constrained natural gas supplies as the war in Iran upends global energy flows, with further disruptions possible as Russia weighs suspending gas exports.
In the days since the start of the war in Iran, Europe has seen a rise in natural gas prices, as shipments through the Strait of Hormuz have been paused and major liquefied natural gas supplier Qatar has shut down production. The strait is a key trading route, moving nearly 20 million barrels of crude oil a day and about 20% of the world’s LNG.
European natural gas futures settled on Friday up 4% to €52.80 per megawatt-hour, or about $58.08. The benchmark has risen by more than 50% this week.
The situation could worsen for Europe. Russian President Vladimir Putin told Russian state television earlier this week that he is considering ending supplying Europe with gas.
“Now other markets are opening up. And perhaps it would be more profitable for us to stop supplying the European market right now. To move into those markets that are opening up and establish ourselves there,” Putin said.
Russia used to supply European markets with oil and natural gas, but since the war in Ukraine, the European Union has gradually reduced its reliance on those supplies. Europe plans to implement a complete ban on Russian LNG imports at the beginning of 2027 and on pipeline gas imports from autumn 2027.
Russia was the world’s second-highest producer of crude oil and the third top exporter of coal and natural gas in 2023, according to the U.S. Energy Information Administration.
“Customers have emerged who are willing to buy the same natural gas at higher prices, in this case due to events in the Middle East, the closure of the Strait of Hormuz, and so on,” Putin said. “This is natural; there’s nothing here, there’s no political agenda — it is just business.”
“If such premium buyers emerge, then I think, I’m even certain, some traditional suppliers, such as the Americans and American companies, will, of course, leave the European market for higher-paying markets,” Putin said.
On Friday, Russia’s Deputy Prime Minister Alexander Novak said he has talked with domestic energy companies about moving Russian LNG from Europe to other markets, such as India, Thailand, the Philippines, and China, Reuters reports.
The war in Iran has disrupted global energy products. For instance, Qatar’s state-owned energy giant QatarEnergy suspended all LNG production earlier this week after an Iranian drone hit its facilities at Ras Laffan and Mesaieed. Qatar exported more than 70% of its LNG production to Asia and 25% to Europe in 2022.
Qatar’s energy minister told the Financial Times that it would take weeks to months for deliveries to return to normal, even if the war ended immediately.
NATURAL GAS PRICES SURGE WORLDWIDE AS IRAN CONFLICT CRIMPS SUPPLY
Meanwhile, the United States is easing some tariffs, allowing for imports of Russian oil. The Department of the Treasury issued a 30-day waiver on Thursday to New Delhi for the purchase of oil from Russia.
India last month agreed to stop purchasing Russian oil as part of a trade agreement with the U.S. to lower tariffs on both countries’ goods. The Trump administration had previously imposed sweeping tariffs on Indian goods for its continued purchases of Russian oil, which have provided Russia with revenues used to fund the war in Ukraine. India is the second-largest importer of Russian oil, following China.