European gas prices hit highest level since 2022

European natural gas prices climbed to nearly $110 per megawatt-hour on Monday, reaching their highest level since late 2022 as the conflict in the Middle East raises concerns over energy supplies ahead of winter.

The benchmark Dutch Title Transfer Facility (TTF) futures contract for delivery in one month rose to €97.64 per megawatt-hour on the Amsterdam exchange, almost 3% higher than Friday’s level.

Gas prices have increased by around one-third since the beginning of the month and more than tripled since the start of the year, adding pressure on households and energy-intensive industries.

Hormuz disruption threatens supplies

The Iran war is a major driver of the rally, with shipping through the Strait of Hormuz, a key route for global liquefied natural gas (LNG) supplies, effectively at a standstill.

LNG flows from the Persian Gulf have fallen by around 80% year-on-year, intensifying concerns about the availability of gas during the European winter.

The price surge also reflects efforts to replenish European storage facilities ahead of colder weather. According to Gas Infrastructure Europe, EU gas storage was 74.6% full, below historical seasonal averages.

Germany, Europe’s largest economy, has been working to increase its reserves, with storage facilities more than 61% full, compared with around 75% at the same time last year.

Households and industry face higher costs

Rising wholesale prices are adding to energy costs for consumers and businesses. In Germany’s Baden-Württemberg state, gas prices for private households increased by 22% over the past 12 months, according to an analysis by comparison portal Verivox.

The impact of higher wholesale prices on households can take time to emerge because gas supplies are often covered by longer-term contracts.

European gas prices last surged to extreme levels following Russia’s invasion of Ukraine, when they exceeded €300 per megawatt-hour. The latest rally has renewed concerns over energy security and the economic impact of prolonged supply disruptions.