European gas prices hit three-year high as winter energy outlook grows bleak

European gas markets are confronting a tough winter as October-delivery contracts on the Amsterdam TTF benchmark climbed above €75/MWh, the strongest level in three years. The surge follows a second series of U.S. attacks on Iran, which has again delayed hopes that the Hormuz Strait - through which roughly a fifth of global LNG flows - will be fully operational. Brent crude prices have also risen past $94 per barrel, adding to broader inflation concerns that are lifting yields on sovereign bonds to decade-highs.

Current gas inventories across Europe average about 65%, with Italy’s storage exceeding 82% while Germany remains in the low-50s, raising questions about meeting EU targets. Energy analyst Davide Tabarelli notes that German buyers may be reluctant to lock in today’s high prices for future deliveries, and Riccardo Marcelli Fabiani expects the impact of higher gas costs to be moderated by weaker global demand and U.S. LNG exports. Nonetheless, the combination of elevated energy prices and persistent inflation risks could strain economies with higher debt levels, particularly Italy.