ECB raises rates as European gas hits highest since 2022

European natural gas prices surged to their highest level since late 2022 on Thursday, as escalating Middle East hostilities and low storage levels ahead of winter intensified fears of a prolonged energy crisis across the continent.

Benchmark TTF futures on the Amsterdam exchange rose to around €82 per megawatt-hour on September 10, roughly triple where prices stood before the conflict began. The rally extended into a fifth consecutive session, with Asian gas prices also climbing to their highest levels in more than three years. Oil prices reinforced the upward momentum.bloomberg+1

ECB Moves on Energy Shock

The European Central Bank raised its three key interest rates by 25 basis points on Thursday, bringing its main rate to 2.5 percent — the second hike in three months — citing the Middle East conflict's impact on energy costs. ECB President Christine Lagarde warned the energy shock could deepen further.euobserver

"In particular, gas prices may rise in the event of further supply disruptions or an unusually cold winter against the backdrop of low storage levels," Lagarde said. She also flagged risks from extreme weather events potentially intensified by El Niño, which could push food prices higher than forecast.unn

Storage Crunch Looms Over Winter

The price spike comes as Europe faces a structural storage deficit. As of early September, underground gas storage facilities stood at roughly 66.6 percent full, about 15 percentage points below the five-year average. Europe entered this year's injection season with its lowest reserves since 2018, at just 31 billion cubic meters.energypolicy.columbia+1

The EU has relaxed its mandatory November 1 storage target from 90 percent to 80 percent for this winter under emergency provisions. Current injection rates suggest Europe may narrowly reach that reduced threshold, but the margin for error is thin.global-energy-flow

Strait of Hormuz at the Center

The primary driver of the rally is the ongoing U.S.-Iran conflict and renewed disruptions around the Strait of Hormuz, which have more than doubled European gas prices in recent months. Competition between European and Asian buyers for limited LNG cargoes has further tightened the market, according to AFP.afp

The energy price surge has driven a 14.3 percent year-on-year increase in energy costs across Europe, the sharpest rise since January 2023. While prices remain well below the peaks above €300 per megawatt-hour seen during the 2022 Russian supply crisis, the trajectory has revived uncomfortable comparisons to that period.finance.yahoo+1