Europe’s energy prices surge as Russia invades Ukraine

European energy prices have increased after Russian forces began military deployment in Ukraine on Thursday, while China's foreign ministry asked countries to work together to protect global energy security.

The benchmark Dutch futures increased by 41 percent for the fourth day, while German power for March increased by 31 percent and coal prices surged; reported Bloomberg on Thursday.

It is unclear yet how the markets will behave as they await the response of the US and its allies. Any actions that can affect Russia's access to the foreign currency can affect the commodity markets which include not only oil and gas but also food.

A full-scale military engagement by Russia into Ukraine will not only disrupt Russian gas from reaching European consumers, but the expected harsh economic and financial sanctions to be slapped on Russia might affect the country’s oil and gas exports to worldwide  markets.

Several analysts said that if Russian energy is removed from the already tight global energy markets, the world may be heading for a possible recession. 

US President Joe Biden said he would meet his Group of Seven counterparts later on Thursday to discuss what further actions can be taken, promising severe sanctions that some speculated could affect Russia’s access to foreign currency.

“The bigger picture will strongly depend on how Europe and the US will respond,” Hans van Cleef, a senior energy economist at ABN Amro Bank NV told Bloomberg. “Will they imply sanctions against the oil and gas sector or not,” Van Cleef added.

Germany has already halted NordStream 2 and the US has imposed sanctions on the Russian company and its CEO who have been building the pipeline. However, Russia’s gas exports via Ukraine are continuing as normal, Russian energy giant Gazprom said on Thursday.

The chair of Germany's foreign affairs committee, Michael Roth, told broadcaster RTL/ntv on Thursday that new gas contracts with Russia were no longer conceivable. “In the end, we have to work faster than planned to make ourselves less dependent on an authoritarian regime,” Roth said.

Analysts are unanimous on forecasting that fuel prices worldwide will continue to surge until the end of the year.

“We’d be facing a catastrophic situation of gas storage being close to zero for next winter. Prices would be sky high. Industries would need to shut down. Inflation would spiral. The European energy crisis could very well trigger a global recession,” Kateryna Filippenko, principal analyst for Europe gas research at WoodMac, wrote for Bloomberg.

The ongoing Russian invasion has put the spotlight on European gas, with the continent already experiencing an energy crunch in which NordStream 2 pipeline was supposed to help as it is meant to increase the gas supply to Europe. For weeks, the EU has been seeking alternatives and contacting suppliers across Asia – since Europe depends on Russia for more than a third of its gas supply.