Europe's Natural Gas Prices Soar to Five-Month High Amid Inflation Concerns
Soaring energy prices in Europe have rekindled inflation fears since the Iran war disrupted oil and gas flows. However, policy makers and bond markets seem more concerned about the jump in natural gas prices than the increase in crude oil futures.
European benchmark natural gas prices have hit a five-month high in recent days as Europe scrambles for LNG supply to fill gas storage sites ahead of winter. Current storage levels are at 63% capacity, the lowest level for this time of year in nearly two decades and well below the five-year average.
The spiking gas prices threaten to raise inflation further and prompt interest rate hikes beyond current expectations. In the 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. 'Natural gas prices have taken over as the key driver of yields,' said Jamie Searle, European rates strategist at Citigroup.