Middle East war sends natural gas prices soaring, raising growth shock risk for Europe and Asia

Core Viewpoint - A prolonged surge in natural gas prices due to the ongoing Middle East conflict poses risks to European growth and impacts some Asian economies significantly [1] Price Movements - Dutch Title Transfer Facility (TTF) futures rose 35% to over 60 euros ($69.64) per megawatt-hour, with prices approximately 76% higher for the week [2] - The Japan-Korea-Marker (JKM) reached a one-year high at around 43 euros per megawatt-hour [2] Supply Disruptions - Qatar halted LNG production following Iranian drone strikes, which Goldman Sachs estimates will reduce global LNG supply by about 19% [3] - The Strait of Hormuz has been threatened with closure by Iranian officials, raising concerns over energy flow disruptions [4] Regional Vulnerabilities - Europe and Asia are more exposed to gas price shocks compared to the U.S., with 25% of Europe's gas supply being LNG [5] - Goldman Sachs warns that a month-long halt in flows through Hormuz could push TTF and JKM prices toward 74 euros per megawatt-hour, reminiscent of the 2022 European energy crisis [7] Economic Implications - Higher energy prices are expected to negatively impact GDP in the U.K. and euro area, with a sustained 10% rise potentially cutting GDP by 0.2% [10] - LNG is identified as a critical concern for Europe's economy, potentially affecting reindustrialization efforts [9] Asian Market Impact - Asia is also vulnerable, with significant portions of LNG imports from the Middle East: 58% for India and 27% for Singapore [12][13] - Countries with limited fiscal space, such as Japan and India, are particularly at risk from energy disruptions [14]