Europe's Gas Prices Soar Amid Iran War Fallout
The recent Iran war has disrupted oil and gas flows to Europe, sparking inflation fears. However, policymakers and bond markets are more concerned about soaring natural gas prices than crude oil futures.
Natural gas benchmark prices have reached a five-month high in Europe due to the scramble for liquefied natural gas (LNG) supply to fill storage sites ahead of winter.
Data from Gas Infrastructure Europe shows that current storage levels are about 63% full, which is the lowest level for this time of year in nearly two decades and well below the five-year average.
Economists warn that spiking gas prices could raise inflation further and prompt interest rate hikes beyond current expectations. In European bond markets, yields on key UK and German bonds have surged to multi-decade highs amid fears of stubborn inflation due to the spike in natural gas prices.