European natural gas and power prices surged after Germany triggered the "alarm stage" of its NatGas-emergency plan amid reductions in supplies from Russia, according to Reuters.
German Economy Minister Robert Habeck said Europe's largest economy is in a severe energy crisis. He warned Germany should prepare for further cuts in Russian NatGas flows after Moscow recently slashed deliveries via the Nord Stream pipeline.
"We must not fool ourselves: The cut in gas supplies is an economic attack on us by Putin," Habeck said.
"It is obviously Putin's strategy to create insecurity, drive up prices and divide us as a society. This is what we are fighting against," he continued.
Habeck wasn't clear if NatGas rationing would be avoided.
The second "alarm stage" of a three-stage emergency plan allows utility companies to pass on higher power prices to industry and households to curb demand. The move comes as the Nord Stream pipeline to Germany operates at 40% of capacity after flows last week were reduced for a "technical problem" by Russian gas exporter Gazprom PJSC.
The second stage also increases energy market monitoring and allows for some coal-fired plants to be reactivated to increase electricity output.
All of this comes as Germany is making a mad dash to fill up its NatGas storage facilities ahead of winter. Total storage stands around 58% full, though the government-mandated target of 90% by November, a mark that might be hard to reach considering Nord Stream flows have been reduced.
Front-month benchmark futures rose as much as 6.5% to 135 euros a megawatt-hour on Germany's elevated gas alarm.
German power for next year also surged 4.5% to 256 euros a megawatt-hour.
The energy crisis in Europe is far from over and has spread well beyond Germany's borders and affects 12 EU member states, ten of which have already warned about NatGas supplies.
Frans Timmermans, the European Union's climate chief, told European Parliament this week that a "risk of a full gas disruption is now more real than ever before ... all this is part of strategy to undermine our unity."
"Europe should be ready in case Russian gas is completely cut off," IEA head Fatih Birol told FT this week.
Habeck also warned Europe's energy crisis could spark contagion in energy markets, drawing a parallel to the Lehman Brothers collapse and how it resulted in the financial crisis of 2008.