European benchmark gas plummets on Middle East ceasefire deal

By Nina Chestney

LONDON, April 8 (Reuters) - The European benchmark gas contract plunged on Wednesday morning after U.S. President Donald Trump agreed to a two-week ceasefire with Iran, raising hopes of a resumption in oil and liquefied natural gas flows through the Strait of Hormuz.

The last-minute deal was subject to Iran's agreement to pause its blockade of oil and gas supplies through the strait, Trump said.

The Dutch gas contract for May TFMBMc1 fell about 17% to 43.95 euros per megawatt hour by 0645 GMT, ICE data showed, its lowest since March 2.

A fifth of the world's LNG passes through the strait that lies between Oman and Iran, but shipping has ground almost to a halt since the United States and Israel attacked Iran at the end of February.

As a result, the European benchmark gas price spiked, hitting an intra-day high of about 74 euros/MWh in mid-March, its highest level since January 2023.

However, it is unlikely that all oil and LNG tankers in the Strait of Hormuz will be able to pass through in the next two weeks and a resumption of normal flows would be dependent on an extension to the ceasefire, analysts said.

There was also significant damage to QatarEnergy's LNG facilities from Iranian strikes last month.

"This will not be resolved by a ceasefire agreement. With around 17% of Qatar’s LNG production destroyed – which, according to Qatar itself, will take three to five years to rebuild – there is no longer an outlook for a global LNG surplus in the coming years," said Arne Lohmann Rasmussen, chief analyst at Global Risk Management.