European gas prices open down 20% on Mideast ceasefire

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London: European natural gas prices tumbled by more than 20% at the market open on Wednesday, as traders reacted to the announcement of a two-week ceasefire between the United States and Iran. 

The benchmark Dutch TTF futures contract saw its sharpest decline in months, dropping to approximately 112 pence per therm as the ‘risk premium’ associated with the Middle East conflict began to evaporate.

The market rally follows weeks of record-high energy costs triggered by the closure of the Strait of Hormuz, a vital chokepoint for roughly 20% of the world’s liquefied natural gas (LNG). The ceasefire, brokered under US-Iran, has raised hopes that Qatari LNG shipments can soon resume their normal routes to Europe. 

While analysts at Eurasia Group warn that repairing damaged infrastructure such as the Ras Laffan terminal will take longer than the two-week truce window, the mere prospect of reopened shipping lanes has provided immediate relief.

The drop in gas prices coincided with a 15% plunge in global oil prices, with Brent crude falling below $100 per barrel for the first time since the escalation began in late February. European stock markets responded positively to the news, with the FTSE 100 hitting its highest level since early March. Despite the volatility, policymakers in Brussels and London remain cautious, noting that a sustained reduction in household energy bills will depend on the stability of the truce and the successful restoration of free navigation through the Persian Gulf.

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