The price of European natural gas dropped significantly amid signs of easing tensions in the Middle East after a ceasefire came into effect in the war between Israel and Iran.

The benchmark TTF futures contract for European natural gas for delivery in one month plummeted by more than 12 per cent in the first minutes of trading.

The futures contract was trading at €35.40 per megawatt-hour ($41.06) on Tuesday morning after being around €41 the previous day.

With this downturn, the gas price returned to roughly the level seen at the start of the war between Israel and Iran on June 13.

In recent trading days, the price was driven up mainly by concerns about an escalation of the war, including a possible blockade of the Strait of Hormuz, a crucial transport route.

Although the majority of the gas passing through the Strait of Hormuz is delivered to Asia, shortages and higher prices in the Asian market would also impact gas trading in Europe, as both regions compete for a limited share of the global liquefied natural gas supply.

In light of the growing hope for de-escalation in the Middle East, market observers believe that traders will once again focus on replenishing European gas reserves with the help of increasing deliveries from the United States.

(dpa/NAN)