European natural gas prices have spiked to their highest point since late 2022, with benchmark futures jumping as much as 4.8% and extending a fifth consecutive session of gains. This surge is attributed to escalating tensions in the Middle East, which have raised fears of prolonged supply disruptions and concerns about winter fuel inventory levels. The rally in oil prices further intensified this upward momentum, with Asian gas prices also hitting their highest levels in over three years.
This energy crisis is particularly acute in Britain, which is bracing for winter with soaring gas prices and thin fuel reserves. UK gas prices have more than doubled since the start of the year, reaching their highest since 2022, and households face the highest winter energy costs in three years. This situation risks reigniting cost-of-living pressures and putting significant pressure on the government to intervene and protect consumers.
The broader European bond market is also experiencing a significant selloff, the steepest among major economies recently, driven by these spiraling gas prices and increasing political risks. French, Italian, and UK longer-term borrowing costs have seen the sharpest increases within the G7 over the past month, with yields hitting multi-year highs. Even Germany, traditionally a safe haven, has not been immune, with investors demanding the chunkiest compensation since 2011 for its 30-year debt. European natural gas specifically surged above €80 a megawatt-hour for the first time in over three years, intensifying the threat to the regional economy as winter approaches.
In the US, veteran commodities strategist Jeff Currie predicts an “extremely high” chance of average gasoline prices hitting $5 a gallon before the midterm elections. Currie attributes this to a combination of scarcity and currency debasement, noting that shortages, which began in refined products, are now spreading upstream into crude oil, signifying a dangerous new phase in the energy shock.
