(Bloomberg) -- Intense swings in European natural gas prices have prompted traders to pile into options contracts, with investors seeking to protect themselves against losses as the conflict in the Middle East risks escalation.

The volume of Dutch natural gas options traded earlier this week surpassed 100,000 per day, according to data from Intercontinental Exchange Inc. That’s almost 50% higher than late last week, the data show. 

Demand for protection increased at the same time as benchmark futures jumped over 20% during four consecutive sessions through Tuesday, erasing this year’s losses. Since then, front-month contracts have mostly fluctuated, but the market remains watchful of further developments that could affect global gas supplies.

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While the European winter ended with record high gas stockpiles due to relatively mild weather and weak industrial demand, recent strikes on energy infrastructure in Ukraine and escalating tensions in the Middle East have put supply risks in focus. The continent lost most of its pipeline flows from Russia two years ago, and now relies on suppliers from across to globe to ship fuel. 

Traders are gearing up to refill gas storage facilities ahead of the next heating season, but could face higher costs for doing so if moving energy supplies across international waters becomes more difficult. At the same time, Europe’s economic recovery has been slow, and higher gas prices could be short-lived if demand doesn’t pick up.

“Using options makes sense when you try to hedge an unknown risk, especially at a time where overall fundamentals — storage levels, weather and economic activity — do not support higher prices,” said said Ole Sloth Hansen, head of commodity strategy at Saxo Bank AS.

Volatility is perking up across markets after a period of relative calm in recent months. Gas options volumes are up 84% year-on-year, with open interest for the contracts 117% higher during the same period, the ICE data show. Trading of Dutch gas futures and options hit a single day volume record with 693,970 contracts exchanged on April 16.

Dutch front-month futures, Europe’s gas benchmark, rose 4.0% to €32.52 a megawatt-hour at 4:50 p.m. in Amsterdam. 

--With assistance from David Marino.

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