What's going on?

European natural gas prices surged again on Wednesday, as the region�s government shakes up its strategy for keeping your radiators running this winter.

What does this mean?

Let�s start with the silver lining: demand for energy is so high right now because of Europe�s strong bounceback from last year�s events. But that recovery doesn�t mean much if it�s not allowed to flourish, and the tough competition for a stagnant supply of energy could bring it to a premature end. Countries, after all, are trying to outbid each other to fill their gas storage sites before a nippy winter arrives, which has driven natural gas prices up 60% in the last two days. That rally probably has further to run too: China is ordering state-owned firms to hoard whatever supplies they can get, while Europe is still holding historically low levels of natural gas for this time of year.

Why should I care?

The bigger picture: The EU spends money to make money.

The European Union isn�t taking this lying down: it said on Wednesday that it�ll be rolling out tax cuts and support packages to help ease the damage to households and businesses. It�s in its interests to do exactly that, given that some of the region�s more energy-intensive companies have already been forced to roll back operations. German ammonia producer SKW Piesteritz, for example, announced on Tuesday that it�ll be cutting production by 20%. That matters: ammonia�s an essential ingredient in fertilizer, and higher crop-growing costs are bound to make their mark on your weekly shop.

For markets: Bail on bonds.
Rising energy costs tend to lead to higher inflation, so investors are getting pretty antsy right about now: bonds tend to perform poorly when prices are on the rise, since the fixed returns they offer become worth less. That explains why investors sold off 10-year UK government bonds on Wednesday, sending yields � which rise when prices fall � to a two-year high.