European Gas Prices Hit Four-Year High Amid Iran Conflict

European natural gas prices reached their highest levels since December 2022 on Monday, briefly surpassing 97 per megawatt-hour. The spike follows a sharp decline in liquefied natural gas shipments through the Strait of Hormuz, which have fallen to 80% below pre-conflict levels due to the ongoing war in Iran. This supply shock coincides with the European Union's continued efforts to phase out Russian energy imports.

EU Energy Commissioner Dan Jorgensen warned that the bloc is facing its worst energy crisis since 2022, noting that gas storage facilities were only 74.62% full as of October 25. In the United Kingdom, month-ahead gas contracts hit a four-year high, leading to significant bill increases for households.

To mitigate the crisis, the German government is planning a national emergency gas reserve with a projected cost of over 3 billion over ten years. The situation has sparked political friction in Germany, where the Alternative for Germany party has called for the restoration of energy ties with Moscow. Russian envoy Kirill Dmitriev characterized the EU's current energy policies as suicidal, arguing that economic cooperation with Russia is inevitable.