European Gas Hits €97 a Megawatt-Hour, Highest Since 2022

European wholesale gas prices hit €97 (£81) a megawatt-hour on Monday, the highest level since 2022, as traders priced in a tight winter supply picture and escalating conflict risk in the Middle East.

The UK's month-ahead contract climbed 4% to 240p a therm. That's its highest point since December 2022, when prices spiked after Russia's full-scale invasion of Ukraine. Falling temperatures across Europe drove the move, with traders betting on stronger heating demand.

Why are prices spiking now?

Two forces are squeezing the market at once: geopolitics and thin inventories.

Reports that the US and Israel have drawn up plans for renewed strikes against Iran after the US midterm elections have stoked fears of further supply disruptions in the Middle East. Those same reports pushed oil as high as $117 a barrel on Friday. Brent crude, the international benchmark, pulled back about 2% on Monday but held above $114.

Europe's gas storage adds to the pressure. Stores sit at roughly 75% full, below the seasonal average of closer to 80%, and at their lowest level in more than a decade heading into winter. Two factors drained the reserves: a slowdown in exports from Qatar, and heavier summer consumption as gas was burned to power refrigeration and cooling.

What does this mean for Britain?

Britain's energy regulators expect the country to pay some of the highest energy costs in Europe this winter. The UK relies on imports to keep supply steady and holds some of the smallest gas stores on the continent, a legacy of decades depending on homegrown North Sea production.

The import bill is already setting records. The UK paid a record £4bn on power imports in the year ending in August, according to figures from the Office for National Statistics. Half of that went on electricity imported from France.

The grid's own inefficiencies are adding cost. Britain has made near-record payments over the past year to fire up gas plants, while wind and solar farms have been paid to turn off because of bottlenecks in the grid.

How hard will households be hit?

British households face rising bills. Analysts predict a 16% increase in January, taking the typical annual dual fuel bill to the equivalent of about £2,000.

That forecast lands on top of a market already stretched by low storage and import dependence. The January timing means the increase would hit consumers in the depths of the heating season, when demand — and prices — are at their peak.

Did markets react?

European stocks rose slightly on Monday as oil softened. The Stoxx Europe 600, which tracks the continent's biggest companies, gained 0.3% in early trading. The UK's blue-chip FTSE 100 added 0.4%.

The divergence is the story: equities found comfort in Monday's 2% oil retreat, while gas markets stayed anchored near four-year highs. Unless storage fills faster or Middle East tensions ease, Europe — and Britain in particular — enters winter paying near-record prices for both fuel and imported power.