Energy prices surged in Europe after Russia halted its biggest natural gas pipeline to the continent indefinitely, plunging the region deeper into a crisis that could push major economies into recession and force rationing.
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Benchmark gas futures jumped as much as 35 per cent, the most in almost six months, and electricity prices increased. The supply cutoff rippled through markets, hitting equities and pushing the euro to a 20-year low. Europe’s politicians have been bracing for weeks for the halt, and are now rushing to put emergency measures in place. Sweden and Finland created backstops over the weekend to help utilities struggling with collateral requirements in a bid to prevent a “Lehman” moment. European energy ministers are set to discuss radical proposals to curb power prices when they hold a special meeting on Friday -- including gas-price caps and a suspension of power derivatives trading.
“Given the gas supply tightness, one cannot exclude mandatory gas curtailment for non-essential industries or even ‘rolling gasouts’ this winter depending on the weather,” analysts at JPMorgan said in a note.
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