European natural gas prices climbed to their highest level since 2023 and oil touched a five-week high on Wednesday, as renewed US strikes on Iran revived fears of a wider Middle East conflict. The advance rattled global bond and stock markets, with investors bracing for a longer stretch of elevated inflation.
European natural gas, traded at the Dutch TTF hub, broke above €75 per megawatt-hour for the first time since the war began in February, reaching its highest level since early 2023. Energy companies are growing anxious about entering winter with thin reserves.
Brent crude, the international oil benchmark, rose as much as 2.5% to just over $97 a barrel before easing to trade 0.4% higher at $95 in London. The gains followed a second round of US strikes on Iran this week, ending a month of relative calm between the two sides.
Storage shortfall deepens the risk
Natural gas prices have climbed steadily since dipping below €40/MWh at the end of June. Brent has risen from a wartime low of $70 in early July. Gas storage across the EU stood at just 63% full in the last week of August, the lowest level in more than a decade for this point in the year.
Germany, which holds the continent's largest storage volume, warned last week that it risks missing its statutory target of 70% full by November. As prices climb, energy companies have been reluctant to buy expensive gas for storage, preferring to wait for the conflict to ease.
Bond yields climb, equities retreat
The rise in energy prices pushed the yield on the 10-year US Treasury to 4.81%, its highest level since 2023. The 10-year German Bund yield rose 0.04 percentage points to 3.38%, keeping German borrowing costs at their highest since 2011. The UK 10-year gilt yield added 0.04 percentage points to 5.26%, a post-2008 high for a second consecutive day.
Eurozone inflation accelerated to 3.3% in August. Energy prices rose 14.3% over the same period. Futures tracking the S&P 500 pointed to a further decline, extending a drop of more than 1% already this week. Asian equities fell harder, as the Nikkei 225 dropped 3%. South Korea's Kospi lost 3.8%.
Source: Financial Times
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