Not just about oil, remember gas
XLE•European gas prices rise as tensions flare
Like oil, gas prices have risen since U.S.-Iran tensions have reignited, and benchmark front month Dutch wholesale gas prices hit their highest levels since April on Tuesday. TFMBMc1 NG/EU
Rabobank energy strategists also pointed to potential additional trouble ahead now that tensions have flared up again.
"Renewed Hormuz disruption reinforces structurally tight LNG balances, weaker Qatari exports, and the risk that Europe enters winter with less comfortable storage unless alternative transit arrangements allow more LNG to move," they said in a note.
(Sophie Kiderlin)
Gas risks could amplify the inflation impact
Oil prices have been extremely closely watched across markets since the Iran war began in an effort to assess the conflict's economic impact - higher prices would lead to greater inflation and central bank interest rate hikes.
That's been highlighted again this week, with money market pricing for policy tightening picking up alongside oil prices. But it's also not just about oil, Jordan Rochester, head of FICC strategy EMEA at Mizuho, pointed out in a note.
"My big concern this time around is of course oil, but more the situation that could develop in natural gas during the summer storage build," he said.
"We are running below the typical build rate and that risks non-economic buying flows over the summer by importers attempting to avoid large fines. If Nat gas makes new war highs, that will have an even wider inflation impact than the initial oil shock due to electricity prices and fertilizer following with it."
