European gas prices surge as Iran ceasefire nears expiration

Monday 20 April 2026 - 10:18

By: Dakir Madiha

European gas prices surge as Iran ceasefire nears expiration

Global economic risks are intensifying as energy prices climb and geopolitical tensions persist between the United States and Iran. Seven weeks into the conflict, policymakers and economists warn of mounting stagflation pressures, driven by rising costs, slowing growth, and constrained monetary policy. The latest projections show a fragile outlook, with global growth forecasts for 2026 revised down to 3.1 percent, and downside scenarios pointing toward near-recession levels around 2 percent.

Central banks are facing a narrowing path. Plans for rate cuts have largely been paused as inflation risks remain elevated. The Bank of England held its benchmark rate at 3.75 percent, citing stronger domestic inflation pressures, while projections indicate consumer prices could rise to 3.5 percent. Government bond yields have surged, with UK 10-year gilts crossing 5 percent for the first time since 2008. The European Central Bank has kept its deposit rate at 2.0 percent, and the Federal Reserve maintained rates between 3.50 and 3.75 percent. Markets have shifted from expecting easing to pricing in further tightening, reflecting the persistence of inflationary forces.

The energy shock remains central to the crisis. Disruptions in the Strait of Hormuz, a critical route for roughly 20 percent of global oil flows, have triggered what energy authorities describe as the most severe supply shock in modern oil market history. European natural gas prices surged nearly 60 percent in March, with the Dutch TTF benchmark approaching 70 euros per megawatt-hour. Prices rose again by 11 percent ahead of the April 22 ceasefire deadline, reaching around 43 euros per megawatt-hour amid renewed uncertainty.

The impact extends beyond fuel markets into global supply chains. The Middle East accounts for a significant share of maritime sulfur trade, and supply disruptions have pushed sulfur prices up by more than 70 percent. This has direct consequences for industrial production, as sulfuric acid is essential in processing key metals such as copper, nickel, cobalt, and lithium. The ripple effects are now visible across sectors tied to energy transition and manufacturing.

Economic indicators point to further strain. Preliminary purchasing managers’ index data for April is expected to confirm a continued slowdown after March recorded the sharpest contraction since late 2023. Diplomatic efforts remain stalled, with Iran rejecting new peace talks in Islamabad. The temporary ceasefire agreed on April 8 is set to expire on April 22, raising the risk of renewed escalation. European officials have already acknowledged the growing likelihood of a stagflation scenario, combining weak growth with persistent inflation.