European Gas Prices Jump 5% on Supply Risks and Low Storage Warnings

European and British wholesale natural gas prices climbed nearly 5% on Monday, reaching their highest levels since late 2022 amid growing concerns over Middle East supply routes and warnings about critically low storage inventories ahead of winter.

Benchmark Prices Spike

The continental European benchmark, the Dutch front-month TTF contract, gained approximately 5% to trade at €83.40 per megawatt-hour (MWh). In the United Kingdom, the NBP wholesale gas contract also jumped almost 5%, breaching the key psychological level of 200 pence to trade at 201.50p per therm. Both benchmarks hit fresh multi-year peaks as traders priced in heightened geopolitical risk.

Supply and Storage Concerns

The rally was intensified by comments from Yukio Kani, the Global CEO of Japan’s largest power generator, JERA. Kani, who heads one of the world's biggest buyers of liquefied natural gas (LNG), warned on Monday that Europe’s gas reserves remain low and that shipping disruptions around the Strait of Hormuz could be prolonged.

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Data from Gas Infrastructure Europe corroborates these concerns, showing the continent's underground storage facilities are only about 68% full. This level lags historical seasonal averages by nearly 17 percentage points at a time when stockpiles are typically nearing maximum capacity. The situation is exacerbated by military friction in the Persian Gulf, which has severely curtailed LNG tanker traffic through the Strait of Hormuz and threatens exports from Qatar, a key global supplier.

Broader Market Impact

The sharp increase in natural gas prices, coupled with Brent crude oil futures rising toward $112 a barrel, is fueling fears of stagflation across European economies. The energy price shock complicates the task for central banks attempting to control inflation.

Following the European Central Bank's decision last week to raise its key interest rate to 2.50%, money markets are now pricing in a higher probability that policymakers will be forced to maintain restrictive monetary policies for longer. The goal would be to prevent the surge in energy costs from embedding into broader inflation expectations.