Europe's electricity markets are flashing their strongest warning since the energy crisis as winter approaches. Wholesale power for January in Germany is trading above €180 a megawatt-hour on the European Energy Exchange, up more than 60% from a year earlier.

The main driver is natural gas, which has surged as Europe struggles to refill storage amid intensifying competition for fuel. The Iran war has added pressure, with the closure of the Strait of Hormuz cutting off supplies from Qatar. Curtailment of France's nuclear fleet from heat and strikes, plus low hydro power stocks, have added strain.

Europe is better positioned than during the 2022 crisis, when power prices soared above €1,000 a megawatt-hour after Russia's invasion of Ukraine. The region has built more LNG infrastructure and diversified suppliers. However, this resilience comes with greater exposure to global LNG markets, where distant disruptions can quickly reverberate.

Higher power costs threaten household bills and business expenses, adding inflation pressure. UK household energy bills are set to rise 25% in January. Power producers including RWE AG, Engie SA and EDP Renewables SA could see earnings 10% above estimates, according to Jefferies analyst Ahmed Farman. Ulf Ek, CIO at Northlander Commodity Advisors LLP, sees prices rising as much as 50% in a cold winter with constrained Middle East supplies.