European gas prices rose almost 7% on Monday morning, following news about supply risks.
The benchmark price index for European natural gas prices - Dutch TTF gas futures - jumped almost 7% to €54 per megawatt-hour on Monday morning, the highest level since mid-February, following news of Egypt's imports falling to zero, fuelling fears that the country cannot re-start its deliveries to the European market.
On Sunday, the Egyptian cabinet announced that their natural gas imports fell to zero from 800 million cubic feet per day. Egypt imports gas from Israel, among others, and sends some of it to Europe in liquidated form (LNG).
The North African country has seen domestic natural gas production decline while the population has been struggling from daily blackouts, admittedly due to a shortage of gas during a time when increased temperatures raise overall demand.
In June 2022, the European Commission, Israel and Egypt agreed to a supply of Israeli gas via Egypt's LNG export infrastructure to the EU.
But since the war with Hamas broke out, Israel has halted the production of its Tamar gas field, from where gas is sent to Egypt, reducing its capacity to meet domestic demand, let alone have any for export.
How will the Israel Hamas war affect European gas prices?
Natural gas prices in Europe have soared about 40% since the war between Israel and Hamas started.
Flows from Egypt to Europe make up a small share, while gas inventories in Europe remain close to full capacity. The crisis in the Middle East has therefore not affected immediate demand.
In the longer run, however, prices could be pushed further up if Israel's capacity to deliver the expected amount of natural gas to the global markets is jeopardised.
Before the Tamar gas field was closed, Israeli gas production totalled 12.3 billion cubic metres in the first half of 2023 and the country was on track for record production in 2023.
Amid fears that the Middle East crisis and further potential sabotage of European pipelines could have a serious impact on European gas prices, policymakers are weighing prolonging the emergency gas price cap introduced in February, as an "insurance policy", according to unnamed senior EU officials cited by the Financial Times.