European natural gas prices fall to a 7-week low as Russia suffers major setbacks in Ukraine war

• European natural gas prices fell over 7% Monday as Ukrainian forces made a rapid advance.
• The Russian setback raised hopes the conflict will end earlier than seen and ease Europe's energy crisis.

European natural gas prices fell to their lowest level in seven weeks on Monday, as Russia suffered major setbacks in Ukraine.

Ukraine's forces made significant territorial gains over the weekend after launching a surprise counter-offensive in the north-eastern Kharkiv region, their chief commander said Sunday. Russia is seen as suffering its worst defeats since abandoning its attack on Kyiv in March.

ICE Dutch TTF gas futures for October, the European benchmark, were down 7.3% at just below 192 euros (about $195) per megawatt hour at last check Monday. That's their lowest since hitting 179.25 euros on July 25, and a drop of over 40% from the all-time high of around 346 euros reached on August 26.

Russia's setback has raised some hopes the war will end earlier than expected, rather than trapping Europe in a drawn-out conflict with Moscow over sanctions and energy supply.

Also weighing on prices is an EU plan to impose a price cap on Russian natural gas, which is seen as already dragging on demand, and signs the EU is filling its gas storage ahead of schedule for the winter.

Analysts said that Ukrainian forces' advance near Kharkiv had also flashed a bullish signal for European currencies including the euro and the British pound.

"The surprise offensive and the re-capture of a key transport hub in the northeastern sector of the front after recent focus on operations in the south caught the market by surprise, and has seen the euro and sterling rebounding versus the US dollar in early trading this week," Saxo Bank strategist John Hardy said in a note.

European leaders have accused Russia of "weaponizing" its natural gas flows to create an energy crisis on the continent in response to Western sanctions over the Ukraine war. Moscow has completely halted natural gas supplies via a key pipeline, causing benchmark prices to soar at a time when Eurozone inflation is running at a record high.

"It will take some time and further developments to assess whether Ukraine can capitalize on its gains and this in turn triggers a new stance from Russia on its energy policy," Hardy said.

Here's how other key assets are performing as investors absorb the latest news from Ukraine:

• The euro jumped 0.84% against the dollar to trade at $1.0131, while the pound climbed 0.67% against the greenback.
• The US dollar index — which measures the buck's performance against a basket of global currencies — slid 0.72% to 108.22 thanks to European currencies' gains.
• Europe's flagship Stoxx 600 index climbed 1.13%, with Frankfurt's DAX 40 leading the rally with a 1.65% gain. Paris's CAC 40 was up 1.30%, while London's FTSE 100 climbed 1.32%.
• US stock futures gained, with S&P 500 futures up 0.52%, Dow futures 0.38% higher and Nasdaq futures rising 0.54%.
• Oil prices climbed despite Ukraine's rapid advance, thanks to demand concerns as China brought in more COVID-19 curbs and after US Treasury Secretary Janet Yellen warned the upcoming EU embargo on seaborne Russian crude could drive a rally. Brent crude jumped 1.1% to $94.84 a barrel, while WTI crude climbed 1% to $87.66.