Russia’s decision not to resume gas flows through the main Nord Stream 1 pipeline to Germany has prompted a new surge in wholesale costs, intensifying concerns for supplies across Europe for the coming winter.
State-owned Gazprom scrapped plans to restart pumping limited volumes on Saturday after a maintenance shutdown, blaming a turbine leak.
The decision – which European governments say is retaliation for Western sanctions over Russia’s war in Ukraine – was inevitably reflected when markets opened for business on Monday morning.
The leading European benchmark, known as the Dutch TTF, has seen various contracts rise by more than 400% over the past year.
The October contract was up by a further 30% while the equivalent for the UK – which is not reliant on Russian energy but exposed to the wider market pressures – was 25% higher.
The euro, which like the pound has been hammered by a strong dollar recently, sank to a new 20-year low against the US currency.
Stock markets also saw turmoil with Germany’s DAX more than 2% down on the back of Russia’s decision in late-morning trade.
The FTSE 100 in London was 0.5% lower – thanks only to its strong line-up of energy constituents.
They were also bolstered by an announcement from the OPEC+ group of oil-producing nations, which include Russia, confirming they would reverse September’s output extension target of 100,000 barrels a day next month because of rising global recession fears.
Brent crude for November delivery was trading 3% higher at $96 in the wake of the small production cut which had been broadly expected.
The wider market mood also reflected a warning from the Kremlin that it would retaliate over a G7 proposal to impose a cap on the price of Russian oil.
“There can only be retaliatory measures,” a spokesman told reporters in Moscow. He also blamed the impact of Western sanctions for the lack of gas through the largest of its supply lines.
In normal times, Nord Stream 1 carries a third of Europe’s supply from Russia.
Record prices, on the back of limited gas flows from Russia during the summer, have already led some energy-intensive industries to scale back production, particularly in Germany.
Berlin revealed on Sunday a €65bn (£56bn) package to help households and businesses navigate the price challenge.
The measures, Germany’s third set during the crisis to date, include tax breaks for manufacturers and grants for the lowest-paid.
The UK is under mounting pressure to follow suit to better shield consumers and companies from the worst effects of the cost of living squeeze.
Tory leadership frontrunner Liz Truss has promised to reveal details of her plans within a week if she wins.
The Bank of England has warned of an energy-led recession given the predictions for bills – widely expected to exceed £5,000 on an annual basis next year given the path for wholesale costs.
Ms Truss argued during the leadership campaign that recession was not inevitable.
Options for the next prime minister include tax cuts, further grants to assist with rising bills and a plan, similar to that revealed by Labour, that would freeze the energy price cap.