Europe gas prices surge to three-year highs as winter storage pressure builds

Households in the United Kingdom are being warned that higher energy bills could follow a sharp rise in wholesale gas prices across Europe. The increase comes as countries try to refill storage ahead of winter, with stocks still below normal for this time of year. The European benchmark gas price has climbed to its highest level since late 2022, while UK gas prices have also reached their highest point since late 2022.

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The benchmark in Europe topped €75 per megawatt hour on Wednesday, according to market data cited in the report. In the UK, gas prices this week rose above 185p per therm. The move has been linked to renewed hostilities between the United States and Iran, which have raised concern that the Strait of Hormuz could remain disrupted for longer.

The Strait of Hormuz is a key route for global energy supplies, with around a fifth of the world's oil and liquefied natural gas passing through it. Analysts quoted in the report said the market is now facing the prospect of buying gas at higher prices before winter, rather than waiting for conditions to improve. One economist said the risks to gas prices were tilted to the upside and warned that the European benchmark could rise further by the end of the year.

The price spike matters because wholesale gas costs feed into household bills through the UK energy price cap. The cap rose in July and is due to increase by 4% in October, taking the typical household bill to £1,723. Cornwall Insight has also forecast a further 9% rise in domestic energy prices in the new year, adding to concern about the cost of living.

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The report says Europe delayed summer stockpiling because wholesale prices were already high and there had been an expectation that the conflict would ease before winter. That gamble has not paid off, leaving storage levels significantly lower than usual. The situation echoes the price shock seen in late 2022, when gas markets were heavily affected by Russia's invasion of Ukraine.

What happens next will depend on whether the Strait of Hormuz reopens more fully and whether gas storage operators move quickly to buy fuel before colder weather sets in. It is not yet clear how long the current disruption will last or how far prices may rise before winter demand peaks. For now, the main risk is that continued market pressure will feed through into higher bills for households and businesses across Europe.

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