Global Markets: European Stock Exchanges Plunge After Gas Prices Surge by 30 Percent

On European stock exchanges on Monday morning, stock prices sharply fell after Russia halted gas deliveries through Nord Stream 1 to Europe, raising concerns about high energy prices and their negative impact on European economies.

The pan-European Stoxx 600 index dropped by 1.6 percent by 9:30 AM, to 409 points.

At the same time, the Frankfurt DAX plummeted by 2.91 percent, to 12,669 points, while the Paris CAC fell by 2 percent, to 6,044 points, and the London FTSE index decreased by 0.84 percent, to 7,219 points.

The biggest losses were seen in the stock prices of German energy companies, including Uniper, RWE, E.ON, and PNE, whose prices fell between 3.5 and 11 percent. 

The sharp decline in stock prices was triggered by the announcement from Russian Gazprom on Friday that it would halt gas flow through the main pipeline to Germany indefinitely, despite expectations that it would resume deliveries on Saturday after a three-day maintenance.

The Kremlin accused European politicians on Sunday of being responsible for the pipeline closure, claiming that their economic sanctions hinder the maintenance of the pipeline.

It Is Becoming Increasingly Difficult to Find Alternatives to Russian Gas

The price of gas in the European market soared by 30 percent on Monday, with one megawatt trading at a spot price of 272 euros.

The Dutch TTF gas delivery contract for October stands at 256 euros, which is 23 percent higher than on Friday and nearly 400 percent higher than a year ago.

– It is difficult to secure supply, and it is becoming increasingly harder to replace the volumes of gas that are not arriving from Russia – said Jacob Mandel, senior commodity analyst at Aurora Energy Research.

Extremely high electricity costs have already forced some energy-intensive industries, including fertilizer and aluminum producers, to reduce production, and EU member governments to inject billions of euros into household assistance programs.

A document obtained by Reuters shows that EU energy ministers will discuss options to curb the sharp rise in energy prices, including gas. At their meeting scheduled for September 9, they will also discuss emergency credit lines for participants in energy markets.

On the back of rising oil prices, stock prices of oil companies rose the most this morning, averaging one percent.

Investors are also looking for new guidance from this week’s ECB meeting, where the central bank is expected to raise interest rates by 75 basis points to combat record inflation, which reached a record 9.1 percent in the eurozone in August.