European natural gas prices surged to their highest level since early 2023 as escalating attacks in the Middle East continue to choke liquefied natural gas shipments through one of the world's most critical transit routes.

Front-month Dutch TTF futures, Europe's benchmark, climbed 3.8% to 78.72 euros a megawatt-hour on Wednesday--their highest intraday level since early 2023--taking gains for the month above 40%. Prices are on pace for their highest close since the end of 2022.

The rally reflects growing concerns that prolonged disruptions to LNG production and flows in the region could leave Europe competing with Asia for a shrinking pool of available cargoes just as the winter heating season approaches.

Qatar is at the heart of the supply threat. The world's second-largest LNG exporter was forced to curb production after Iranian missile strikes damaged two LNG trains at Ras Laffan, the world's largest LNG export facility, in March, knocking out around 17% of its LNG export capacity.

In late August, QatarEnergy--the state-owned petroleum company of Qatar--extended force majeure on contracted supplies for some buyers into early November.

The LNG market has few ways to absorb a major supply shock. "Unlike with oil, there are no alternative export routes, such as the Bab el-Mandeb Strait on the Red Sea or pipelines leading directly to the Gulf of Oman," said Norman Liebke, commodity analyst at Commerzbank.

Even if the Strait of Hormuz reopens soon, Qatar's LNG supply isn't expected to return to normal immediately. Production could take weeks to ramp back up, while damage to the Ras Laffan facility is expected to keep output below capacity for the next three to five years.

Any prolonged restriction on tanker traffic through Hormuz could now further reduce the availability of LNG cargoes and force European importers to compete more aggressively with Asian buyers for supplies available from other regions, as winter nears.

Gas storage across the European Union is only about 67% full, below the seasonal average. The squeeze could become more acute if colder weather boosts Asian heating demand.

"The situation on the global gas market remains more strained overall than on the oil market," said Liebke.