European natural gas prices spike after Germany declares 'alarm' stage of emergency gas plan as Russia cuts supplies to Europe

• European natural gas futures jumped Thursday after Germany entered the "alarm" phase of its gas emergency plan.
• Berlin said Russia's reduction of gas supplies is an attack on Europe's largest economy.

European gas prices surged Thursday as Germany raised the alert on its supply crisis, highlighting the impact of Russia's reduced flows into the region in the wake of Moscow's invasion of Ukraine.

Benchmark Dutch futures contracts rose as much as 8.8% to 138 euros per megawatt hour ($145). German Economy Minister Robert Habeck declared the country is now in the "alarm" phase of its gas emergency plan, signaling that businesses and households need to cut down on consumption and that the government foresees long-term risk of supply shortfalls.

Germany has exited the early-warning level and could potentially move into the third and final phase of the plan, the emergency level.

"We must not fool ourselves: The cut in gas supplies is an economic attack on us by [Russian President Vladimir] Putin," Habeck said in a statement, according to Reuters.

The German government will provide a credit line of 15 billion euros ($15.76 billion) to fill gas storage facilities and to launch an auction model this summer to encourage industrial users to save gas, the report said. The European Union on Wednesday suggested it would temporarily use coal to address shortfalls from Russia gas supplies.

Gazprom, Russia's state gas company, cut flows through the Nord Stream 1 pipeline to Germany by 60% last week, CNN reported. Gazprom said the move stemmed from the West's withholding key turbines because of sanctions.

Berlin held off on triggering an alarm-phase clause that would allow utilities to pass high prices onto industrial businesses and households. But Habeck said the clause may go into effect if price increases wore on.

"If this minus becomes so big that the companies can't bear it any more and they fall down, the whole market threatens to fall down at some point — so a Lehman Brothers effect in the energy system," Habeck said, referring to the 2008 collapse of the US investment bank that triggered the global financial crisis.