UK and European natural gas prices have fallen below prewar levels, providing relief to policymakers amid ongoing geopolitical tensions. UK gas prices dropped to 104p per therm, down from a three-year high of 180p per therm in March, while European benchmark prices fell to €41.35 per MWh. This decline comes despite the Strait of Hormuz closure and reduced LNG supplies from Qatar and the UAE.

Traders attribute the price drop to reduced Asian demand, particularly from China, which has increased coal-based generation and decreased competition for LNG cargoes. The International Monetary Fund warned this week that the UK faces the largest economic growth hit among major economies due to its high dependence on natural gas for heating. UK 10-year gilt yields have risen above 4.8 per cent since the conflict began, increasing government borrowing costs.

The price decline offers some respite for Chancellor Rachel Reeves, with Cornwall Insight projecting a 13 per cent increase in the July price cap compared to a previously forecast 20 per cent jump. While still potentially painful for households facing bills of £1,861 annually, this pales in comparison to the post-Ukraine invasion surge that required a £44 billion government bailout. Energy analysts caution that uncertainty remains high with Qatar's LNG supplies still disrupted.