European stock markets were mixed on Wednesday as Russia cut gas supply to Poland and Bulgaria, deepening the energy crisis across the continent.
It came as gas prices soared by as much as a fifth on the day after Gazprom confirmed it has turned off the taps to Poland and Bulgaria as they had failed to pay in roubles. The company said supplies will be halted until payment has been made.
The British wholesale gas contract for immediate delivery climbed nearly 14% to 146.50 pence per therm, while the European benchmark, Dutch futures contract for winter delivery, rose as much as 20% before dropping down to 8% ahead at €106 per megawatt hour.
Prices are still around six times higher than they were a year ago.
The Russian president has ordered so-called "unfriendly" nations to pay for gas in its home currency, however, the EU has resisted as the contracts stipulate payments in euros.
Poland has since said it would accelerate the building of its new floating liquefied natural gas (LNG) terminal in response.
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Traders now fear that the move could be a precursor to Putin turning off the taps for the rest of the bloc.
Dominic Raab, UK deputy prime minister told Sky News: "It will have a very damaging effect on Russia as well because it is becoming further and further, more and more, not just a political pariah, but an economic pariah."
Meanwhile, Ursula von der Leyen, president of the European Commission, accused Russia of trying to use gas as “an instrument of blackmail”.
"We are prepared for this scenario. We are in close contact with all member states. We have been working to ensure alternative deliveries and the best possible storage levels across the EU," she said.
Watch: Why are gas prices rising?
The euro fell to a five-year low against the dollar on the back of the news, falling below $1.06 for the first time since 2017.The single currency has lost more than 4% of its value so far in April, and is heading for its worst monthly loss in more than seven years.
"A big drop in the euro demonstrates how investors are concerned about the impact of a further surge in energy prices on the Eurozone economy and how the European Central Bank is lagging behind counterparts like the US Federal Reserve and Bank of England in its efforts to get inflation under control," Russ Mould, investment director at AJ Bell, said.
“Arguably the ECB faces a much more difficult task as it looks to balance the needs of a group of economies with very different dynamics.
It followed a negative session on Tuesday, where market weakness was led by the Nasdaq, which slid to its lowest levels in over a month. The Russell 2000 also posted its lowest daily close since December 2020.
Senior market analyst at Oanda Jeffrey Halley said: “The Nasdaq led the equity market wipe-out overnight, with its near 4% retreat led by Tesla (TSLA), which fell by 12.2%. You could look at it two ways.”
“Either Elon Musk sold his latest stock awards to generate the $21bn in cash for his part of the Twitter (TWTR) buyout, or the street is starting to wonder how he could possibly effectively run Tesla, Starlink, Space-X and Twitter simultaneously.”
Asian markets were mixed on Wednesday following a rout on Wall Street overnight.
In Japan, the Nikkei (^N225) fell 1.2% while other key markets pushed higher.
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