(Bloomberg) -- Asian liquefied natural gas prices jumped to the highest level since early January amid anxiety that Israel’s response to Iran’s attack over the weekend may spiral into a wider conflict.

The North Asian spot rate topped $11 per million British thermal units on Tuesday and has climbed around 40% since the end of February, according to traders. That followed a similar gain in Europe, which competes with Asia for LNG. Traders are exiting short positions as they evaluate the possibility of a broader escalation in the Middle East, helping to lift prices.

Adding to the bullish tailwinds, gas flows to US LNG export facilities fell by a quarter over the last week, in part due to maintenance, which may curb supply to Asia. Japanese importers are also looking to procure more gas.

Read More: European Gas Erases Year-to-Date Losses as Israel Vows Response

Gas prices in Asia and Europe have rebounded after sliding to the lowest level since 2021 in February on high inventories and mild winter weather. However, the rally may run out of steam because the higher cost of LNG is expected to curb demand from price-sensitive emerging nations in Asia.

The worst case scenario of an escalation of hostilities in the Middle East would be Iran closing the Strait of Hormuz — a key conduit for roughly 20% of all LNG trade. While that’s unlikely, a disruption in the strait could see prices rise above $100 per million BTU, an all-time high, according to Rystad Energy.

The market has not yet priced in the risk of a broader conflict in the Middle East and is assessing any possible impact on trade flows to demand centers in Europe and Asia, Lu Ming Pang, an analyst at Rystad, said in a note.

Other LNG market news:

  • Thailand’s state-run energy company PTT bought an LNG cargo on a DES basis for May 1-2 delivery at a price above $10/mmbtu
  • PetroVietnam Gas is seeking to purchase an LNG cargo on a DES basis for June 1-10 delivery to Vietnam

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(Updates with spot market news after sixth paragraph)

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