European natural gas prices have entered a phase of volatility following their largest drop in over two months, with traders awaiting the full details of a US-Iran agreement aimed at restoring shipping through the Strait of Hormuz.

The benchmark European gas futures contract plunged 9% on Monday and has since experienced choppy trading, fluctuating between gains and losses. Prices were initially pressured by a report suggesting Qatar plans to restore the vast majority of its liquefied natural gas export capacity within two months of the waterway reopening. However, this optimism, echoed by the US President's claim that transit could resume this Friday, is not shared by European allies.

Analysts from the EnergyScan platform, part of French energy group Engie, noted in a report: "While Asian and European shipping companies welcome the news of this agreement, they are still waiting for more details, including arrangements for clearing mines from the channel. Rebuilding market confidence in transit through the Strait of Hormuz could take weeks."

Market participants also harbor concerns. The global supply of seaborne LNG is limited and competition for cargoes is intense. These worries are compounded by labor strikes at Australian LNG export facilities, further tightening the market. Consecutive heatwaves across parts of Asia and Europe are boosting energy demand, making it more challenging for Europe to replenish its natural gas storage for the coming winter.

Currently, LNG deliveries to the European continent remain below last year's levels. The average volume of LNG cargoes destined for Northwestern and Eastern Europe over the past 30 days is down approximately 20% year-on-year.

Prior to the conflict, roughly one-fifth of the world's seaborne LNG passed through the Strait of Hormuz. Following the outbreak of hostilities, shipping in the Persian Gulf nearly ground to a halt. The Iranian President described the memorandum of understanding reached with the United States as a "significant step," but emphasized that a long-term truce agreement has not yet been finalized.