Iran launched a retaliatory drone attack against the U.S. Navy’s Fifth Fleet headquarters in Bahrain on Saturday, June 27. This followed U.S. airstrikes on Iranian missile and drone facilities on June 26. The U.S. operation responded to a previous Iranian attack on a commercial vessel.
Direct military strikes now threaten the stability of the Strait of Hormuz. Approximately 20% of global liquefied natural gas (LNG) moved through this chokepoint before the escalation. A closure of the strait would remove significant LNG volumes from the global market.
Natural gas investors expect a volatile opening following the weekend conflict. European gas benchmark (TTF) volatility more than doubled during an earlier phase of this crisis. The confrontation creates a significant risk premium for LNG cargoes heading to Europe and Asia.