European and British wholesale natural gas prices climbed almost 5% on Monday, reaching their highest levels since 2022.
The rally came as growing disruption to Middle East energy routes and concerns over Europe’s depleted gas reserves increased pressure across energy markets.
UK Gas Prices Break Above Key Level
The British NBP wholesale gas contract rose nearly 5%, breaking above the important 200 pence-per-therm level.
Prices traded around 201.50p per therm, marking their strongest level since late 2022.
The move highlights the growing concern among traders over tightening supply conditions and geopolitical risks affecting global energy flows.
European Gas Prices Reach Multi-Year Highs
In continental Europe, the benchmark Dutch TTF front-month contract also gained around 5%.
Prices climbed to approximately €83.40 per megawatt-hour, reaching fresh multi-year highs.
Traders have been rapidly adjusting positions as geopolitical risks increase across major energy transport routes.
JERA Warns Europe’s Gas Reserves Remain Low
The rally gained further momentum after a warning from Yukio Kani, Global CEO and Chair of JERA.
JERA is Japan’s largest power producer and one of the world’s biggest buyers of liquefied natural gas, or LNG.
Kani warned that European gas reserves remain relatively low and that shipping disruptions around the Strait of Hormuz could continue for an extended period.
His comments added to existing fears about Europe’s ability to manage potential supply shortages during the coming winter.
European Gas Storage Trails Seasonal Averages
Data from Gas Infrastructure Europe shows that underground gas storage facilities are currently around 68% full.
That level is approximately 17 percentage points below historical seasonal averages.
At this stage of the year, European storage sites are normally approaching maximum capacity.
Lower inventories therefore leave the region more exposed to sudden supply disruptions or stronger-than-expected winter demand.
Strait of Hormuz Disruptions Threaten LNG Supply
Geopolitical tensions in the Persian Gulf have significantly reduced LNG tanker traffic through the Strait of Hormuz.
The disruption is particularly important because the route is essential for Qatari LNG exports.
Qatar represents a major source of flexible LNG supply for international markets, including Europe.
Any prolonged disruption could therefore increase competition for available cargoes and push European gas prices even higher.
Red Sea Risks Add Pressure to Energy Markets
Energy markets are also monitoring growing instability around Red Sea shipping routes.
Advances by Yemen’s Houthi militants near key maritime corridors, combined with new attacks on regional pipeline infrastructure, have increased concerns over alternative transport routes.
With several shipping corridors under pressure, traders are placing a larger geopolitical risk premium on both natural gas and crude oil.
Rising Energy Prices Increase Inflation Risks
The sharp rise in European natural gas prices is also increasing concerns about inflation.
Brent crude oil has continued to climb, adding further pressure to energy costs across European economies.
Higher oil and gas prices can raise costs for businesses, transportation and households, potentially creating another wave of inflationary pressure.
Energy Rally Could Influence Central Bank Policy
The latest increase in energy prices comes shortly after the European Central Bank raised its deposit facility rate by 25 basis points to 2.50%.
Persistently high energy costs could complicate the inflation outlook for European policymakers.
If natural gas and oil prices remain elevated, central banks may face greater pressure to keep monetary policy restrictive for longer.
Markets are therefore watching whether the latest energy shock could influence interest-rate expectations in both Europe and the United States.
European Gas Market Faces Growing Supply Risks
European gas prices are now being driven by a combination of low storage levels, geopolitical tensions and uncertainty surrounding LNG supply.
With inventories below seasonal averages and major shipping routes facing disruption, Europe remains vulnerable to further volatility.
The outlook for gas prices will largely depend on how long Middle East supply disruptions persist and whether Europe can rebuild storage levels before winter demand accelerates.
