Natural Gas Overtakes Oil as Top Inflation Risk for European Bond Markets

Natural gas has overtaken oil as the main inflation concern for European bond investors, with winter contracts costing more than twice their level a year ago. German and British 10-year government bond yields have reached multidecade highs even as Brent crude remains about 30% below its peak during the U.S.-Iran conflict. Natural gas accounts for about 21% of the European Union’s energy basket and 25% to 35% in the United Kingdom. The European Central Bank has said wholesale gas-price changes pass through to consumer inflation with lags that vary by country, and its June projections placed euro-area energy inflation at 12.5% in the third quarter.