European gas prices hit 3-year high amid war fears

• European gas storage is only around 63–65% full, leaving countries with less time to replenish reserves before winter. 
• Rising energy costs have pushed Eurozone inflation to 3.3%, according to ECB economists. 

European natural gas prices surged to their highest levels since early 2023, while crude oil touched a multi-week high on Wednesday following the resumption of direct military hostilities between the United States and Iran.

The benchmark Dutch TTF gas futures contract rose by more than 6 percent to top €74 per megawatt-hour (MWh). In parallel energy markets, Brent crude rose sharply to clear $94.65 per barrel, while US West Texas Intermediate (WTI) crude gained over 5 percent to reach $90.22 per barrel, marking the highest price levels seen since July. 

The sudden market surge follows new US military strikes carried out by CENTCOM against targets inside Iran, including positions near the strategic Strait of Hormuz, which was met by Iranian counter-strikes targeting US military installations across the region. 

Threats to European Winter energy reserves 

The escalation has intensified global concerns over prolonged disruptions to maritime shipping through the Strait of Hormuz, a critical bottleneck for Persian Gulf liquefied natural gas (LNG) and crude oil exports.

The market shock comes at a vulnerable moment for European energy security. European natural gas storage facilities are currently filled to roughly 63 to 65 percent capacity, the lowest seasonal inventory level recorded for early Sep. in years. making it increasingly difficult for European nations to replenish reserves ahead of the winter heating season amid supply reductions from Qatar and other Gulf exporters.

Read more: US munition depletion in Iran war raises “soft spots” against Russia & China: report

Eurozone inflation 

Compounding the dire economic outlook, European Central Bank (ECB) economists stated that rising energy prices, exacerbated by ongoing military aggression against Iran and the effective closure of key shipping corridors in the Strait of Hormuz, have been the primary driver behind Eurozone inflation climbing to 3.3 percent.

According to ECB analysts, the current economic shock differs fundamentally from the inflationary waves of 2021 and 2022, as direct physical disruptions to LNG supplies and persistent maritime blockades threaten to sustain elevated utility costs and economic pressure across the currency bloc well through the end of the year.