European benchmark prices hit their highest level in nearly three years as traders are rushing to stockpile natural gas, driven by concerns over winter supply and geopolitical tensions in the Middle East, reported by Bloomberg.

The front-month futures contract climbed as much as 3.5% on September 8, reaching levels not seen since January 2023. While Iran has signaled that a deal with Oman on temporary safe passage through the Strait of Hormuz is close, markets remain wary after an attack on an Iranian tanker over the weekend, and fears of further vessel strikes persist.

Oil markets also gained ground following strikes on Saudi energy infrastructure, adding to broader uncertainty.

Europe is relying on higher prices to attract additional LNG cargoes from global markets, especially as the heating season looms. Yet storage inventories remain well behind schedule. Currently, facilities across the region are just 67% full, far below the typical seasonal average of 83%.

"As the European gas market enters winter with extremely low inventory levels, its flexibility to absorb further supply or demand shocks is limited," analysts at Timera Energy noted. "Europe is raising prices to win the competition against Asia for [marginal] additional LNG supplies."

In Germany, the continent's biggest storage holder, reserves stand at only about half capacity. According to gas storage group INES, the country could still meet its November 1 national filling target if customers fully use booked capacity. However, they warned that even a 77% fill level would prove insufficient in the event of a severe cold snap.

On a brighter note, a Qatari LNG carrier that loaded in early July has passed through the Strait of Hormuz and is heading to Pakistan – the first such shipment from the country via that route since July. A broader recovery in Persian Gulf LNG exports would offer relief to price-sensitive buyers, particularly in South Asia, which have struggled with supply shortages and power outages.

The rally in gas is also pushing up power costs, as gas-fired plants often set electricity prices. This effect is especially pronounced in Germany, where shorter daylight hours in winter reduce solar output and increase reliance on fossil-fuel generation.

According to EEX data, German power futures for 2027 briefly surged to €126.62 per MWh, the highest since October 2023.