European gas prices have climbed to levels unseen since 2022, driven by concerns about the continent's ability to secure adequate supply through the winter months and geopolitical tensions in the Middle East. Wholesale gas prices hit €97 (£81) a megawatt-hour on Monday as temperatures across Europe fell and traders anticipated stronger demand for heating. The Guardian reported that fears of further supply disruptions have mounted following reports of US and Israeli plans for renewed strikes against Iran after the US midterm elections.
In the UK, the month ahead contract rose by 4% to 240p a therm, reaching its highest level since December 2022 when prices surged following Russia's full-scale invasion of Ukraine. British households face particular pressure, with energy bills predicted to rise 16% in January to around £2,000 for a typical annual dual fuel bill. Britain's energy regulators have said the country is expected to pay some of the highest energy costs in Europe this winter, partly because the UK relies heavily on imports to secure steady supply and maintains some of the smallest gas stores on the continent after decades of depending on North Sea production.
The surge in gas prices reflects broader concerns about Europe's energy security heading into winter. European gas storage is currently about 75% full, down from a seasonal average closer to 80%, owing to a slowdown in exports from Qatar and increased consumption over summer for refrigeration and cooling. The Office for National Statistics reported that the UK paid a record £4bn on power imports over the year ending in August, with half of that spent on electricity imported from France.
Oil prices, which also climbed amid similar supply concerns, remain elevated. Brent crude reached as high as $117 a barrel on Friday before retreating about 2% on Monday, but still stands at nearly $115 a barrel. The jump in energy costs has had limited impact on stock markets so far, with the Stoxx Europe 600 up by 0.3% in early trading on Monday and the UK's FTSE 100 rising by 0.4%.
For UK households and businesses, the combination of higher gas prices, rising energy bills and Britain's dependence on imports means winter energy costs will be substantially higher than in previous years, squeezing both domestic budgets and business operating expenses.