European Energy Stocks Rally on Higher Oil and Gas Prices

The recent jump in oil and gas prices has European energy markets back in focus. Eurozone inflation is at 3.3%, and energy costs have surged 14.3% due to the US-Iran conflict, prompting higher wholesale electricity prices. This environment may boost certain energy stocks.

Simply Wall St analyzed three European energy companies that could benefit from rising oil and gas prices: Elia Group, AB Ignitis grupe, and Ascopiave. These companies operate in Belgium, Germany, Lithuania, and Italy, respectively.

Elia Group operates high-voltage transmission grids in Belgium and Germany. While less exposed to commodity price swings directly, the company benefits from increased power prices supporting grid investments and congestion-related revenues. The market cap is €14.0 billion, with a significant capital expenditure program underway.

AB Ignitis grupe is a vertically integrated Baltic utility generating electricity and heat across Lithuania and neighboring countries. It focuses on green generation, grids, and customer energy solutions. European power prices often move with gas costs, making AB Ignitis a potential beneficiary of higher wholesale prices while maintaining regulated network income and reserve capacity payments.

Ascopiave is an Italian utility distributing natural gas through local networks, earning regulated fees that can rise when end-user gas prices and network volumes increase. With high leverage, rising interest rates, and a dividend not well covered by free cash flow, investors must be comfortable with funding risks.