British wholesale gas prices have climbed to their highest level in more than eight months – risking a future spike in energy bills – amid fears over escalating tensions in the war between Ukraine and Russia.
Prices surged past 100p per therm on Monday, the highest since December 2023, according to London Stock Exchange Group data.
It comes following Kyiv’s decision to launch an invasion of Russia’s Kursk region last week.
Ukrainian media has since broadcast unverified video appearing to show the country’s soldiers in control of a gas measuring facility in the town of Sudzha in the region – a key site for Russian exports of natural gas to Europe via Ukraine.
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Supply issues have also contributed to the rise in gas prices, including a recent unplanned outage at the crucial Bacton Seal terminal on the Norfolk coast. The St Fergus Mobil gas terminal in Aberdeenshire will also soon close for more than five weeks.
Meanwhile, oil prices have also jumped as fears grow over the deteriorating situation in the Middle East – heightening the prospect of more expensive petrol if the increases are sustained.
The price of benchmark Brent crude rose to more than $80 (£63) a barrel on Monday, the highest since 31 July.
Speculation has been mounting that Iran could retaliate against Israel following the killing of a senior Hamas member in Tehran last month, while the US has ordered the deployment of a guided missile submarine to the oil-producing region.
A man in Gaza City watches an Israeli airstrike on a residential building on Sunday. Pic: Reuters
Tensions have been further fuelled by the Israeli killing of Hezbollah’s top military commander, Fuad Shukr, in Lebanon’s capital Beirut last month.
An Israeli airstrike on a school-turned-shelter in Gaza City, which Palestinian health officials say killed 80 people, has also raised doubts over the prospects of an imminent ceasefire in the Israel-Hamas war.
The rise in the oil price also comes following lows last week when fears over a recession in the US prompted a market sell-off.
However, new data which showed a drop in US jobless claims lessened recession fears towards the end of the week.
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Markets analyst Tony Sycamore, from trading platform IG UK, said: “Support [on oil prices] is coming from last week’s better than expected US data, which eased fears of a US recession.
“There is also a great deal of anxiety about when Iran might look to avenge Israel’s assassination of key Hamas and Hezbollah leaders. [It] feels like a matter of when, not if.”
Warren Patterson, from Dutch financial institution ING, added: “The market is still waiting for Iran’s response.”
However, despite fears over gas supplies, Russia’s Gazprom said it would send 39.6 million cubic metres (mcm) of gas to Europe on Monday compared to 39.3 mcm on Sunday.
Christoph Halser, an analyst at Rystad Energy, said the impact of any escalation in the war may also be limited as Europe has reduced its dependency on Russian gas in recent years.