Why U.S. natural gas prices defy oil rally amid Persian Gulf crisis: Elev8 broker analysis

Global financial markets have seen a lot of volatility lately due to escalating tensions in the Persian Gulf, which pushed major energy benchmarks like Brent and WTI crude sharply higher. Yet, the U.S. natural gas benchmark at Henry Hub has remained remarkably low, trading near $3.00 per million British thermal units (MMBtu) and even dipping to a low of $2.50/MMBtu in late April. For any active market trader, this phenomenon highlights the difference between regional gas dynamics and global oil trading. It also creates compelling opportunities for trading energy Contracts for Difference (CFDs). As a global CFD broker, Elev8 continuously monitors intermarket anomalies to equip clients with the data they need to make informed decisions. To understand why U.S. natural gas remains insulated from the current crisis, we must examine the market's underlying structural fundamentals.

Why U.S. natural gas prices struggle to rise

Several reasons explain why U.S. natural gas prices have not followed oil during the Persian Gulf crisis and why they may remain low for the foreseeable future.

First, unlike the global oil market or highly volatile assets like Bitcoin and foreign exchange, the natural gas market is composed of distinct regional markets rather than a single global market. While a Persian Gulf crisis directly threatens international trade routes and disrupts European and Asian benchmarks (TTF and JKM), the U.S. market remains protected by its geographical isolation and vast domestic infrastructure. As the world's largest natural gas producer, the U.S. is entirely self-sufficient and operates as a net exporter with limited physical exposure to Persian Gulf disruptions. Consequently, Henry Hub pricing is predominantly influenced by local supply and demand factors.

Second, the U. S. sits on an enormous shale reserve base, estimated at 29.4 billion barrels of shale oil and 379.4 trillion cubic feet (Tcf) of shale gas. This huge volume of available potential supply means that any threat of a structural shortage could be easily mitigated by existing domestic capacity. Furthermore, higher oil prices from Middle East tensions encourage U.S. shale companies to increase drilling in oil-rich basins like the Permian. Because natural gas is extracted there as a direct byproduct of oil production, this drilling surge results in an influx of supply. Thus, a global oil rally fundamentally triggers a domestic supply expansion, exerting downward pressure on Henry Hub prices.

Third, while high global prices make exporting U.S. liquefied natural gas (LNG) highly profitable, the limited physical infrastructure creates a major bottleneck. The U.S. cannot build new export terminals overnight. It can only run its current facilities at maximum capacity. This infrastructure bottleneck caps LNG exports at 12 to 14 billion cubic feet per day (Bcf/d), trapping the remaining supply at home and keeping local prices depressed.

Fourth, robust wind and solar generation are actively displacing natural gas consumption within the electric power sector. According to Bluegold Trader, renewables are currently displacing up to 10 Bcf/d of gas burn, with over 230 Bcf displaced in the past 30 days alone. This structural shift effectively caps natural gas price upside, even as overall power demand continues to grow.

Fifth, the retirement of coal-fired power plants has slowed down. Driven by the massive expected electricity demand from modern data centres, AI, and cryptocurrency mining, coal generation may actually increase in the near term, directly eroding the market share that would otherwise belong to gas-fired generation.

Finally, when it comes to natural gas prices, local weather always beats geopolitics. Mild U.S. weather has recently kept demand low and storage inventories high. Even if upcoming heatwaves cause temporary price spikes, daily weather trends will continue to drive the market far more than overseas conflicts.

'Many market participants expected U.S. natural gas to automatically mirror oil spikes during a Middle East crisis, but U.S. Henry Hub prices are driven by domestic fundamentals and often ignore distant risk premiums,' concludes Kar Yong Ang, a financial market expert at Elev8 broker. 'Indeed, a geopolitical oil boom can actually worsen a local natural gas glut, putting severe downward pressure on short-term spot prices. Technically, the trend remains bullish, but a retracement towards $2.900 seems likely, and should the weather turn out to be cooler than expected, the natural gas prompt-month futures contract may drop as low as $2.740'.

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