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German utility Uniper warned Tuesday that European gas prices will stay at €50 to €60 per megawatt hour while the Strait of Hormuz remains closed.
European gas prices will stay at €50 to €60 per megawatt hour while the Strait of Hormuz remains closed, German utility Uniper warned Tuesday, showing the chokepoint's disruption has become a structural cost for Europe's energy system.
"These high prices are bad for our customers, bad for the industry and bad for our wealth. That is why we need a solution," Michael Lewis, chief executive of Uniper, told journalists after presenting first-half results.
The warning comes as efforts to reopen the strait stalled after U.S. President Donald Trump responded to Iran's conditions for a peace deal with his own demands on Monday. Brent crude climbed 2 percent Tuesday as hopes for a swift resolution dimmed, while European power prices jumped more than 20 percent as a heatwave curbed French nuclear output and German wind generation, according to Reuters data.
The elevated price range increases costs for utilities and energy-intensive industries across Europe, with the potential to feed through to higher inflation and weigh on energy sector stocks and broader European equities. With no reopening timeline in sight, traders are pricing sustained disruption through the winter heating season.
The Strait of Hormuz, described by Rystad Energy as the world's most important energy chokepoint, has seen vessel crossings decline sharply since the closure, with most crude tankers transiting with Automatic Identification System transponders disabled, reflecting heightened commercial caution. Although export volumes recovered somewhat, inbound ballast traffic lagged, indicating that commercial confidence strengthened more slowly than physical flows.
Iran's asymmetric advantage lies in its ability to impose costs without permanently closing the strait. The country needs only to convince market participants that uninterrupted passage can no longer be assumed, according to W. Schreiner Parker, head of emerging markets and NOCs at Rystad Energy. Higher insurance premiums, precautionary inventories, deferred investment and increased freight costs become the economic consequences of uncertainty rather than the physical destruction of vessels.
The last time European gas prices traded at these levels was during the 2022 energy crisis triggered by Russia's invasion of Ukraine, when TTF futures reached record highs before normalizing. The current range reflects a market that has structurally repriced geopolitical risk, with the assumption of uninterrupted passage through the strait no longer taken for granted.
The disruption has begun to change how long-term energy investments are evaluated, according to Rystad Energy. Producers in the Atlantic Margin — including Brazil, Guyana, Canada and the United States — may see their strategic position improve as resilience commands a greater premium alongside geology and cost. Gulf producers remain indispensable to global supply, but the discount rate capital assigns to their geography may shift.
The repricing is likely to be gradual and contested rather than a wholesale reallocation of capital. Gulf risk has been priced by experienced operators for decades, and the region's resource quality and production costs remain unmatched. But the assumption of uninterrupted passage that underpinned decades of investment will not be restored to what it was before this disruption.
For European utilities like Uniper, the immediate challenge is more concrete. The company's warning reflects the reality that every month of closure adds to the cost base of the continent's industrial sector. With the U.S.-Iran negotiations showing no signs of progress — Trump's counter-demands on Monday complicated rather than advanced the talks — the market's baseline assumption is that elevated prices persist.
This article is for informational purposes only and does not constitute investment advice.
