london natural gas is one of several commodities caught in the crossfire of the conflict in ukraine and the european economy could take a hit if russia halts its exports supplyside risks arising from the war have stoked extreme volatility across global commodity markets with oil nickel and wheat also surging alongside natural gas in recent weeks natural gas is once again front and center after russian deputy prime minister alexander novak warned that moscow could halt its exports to germany and the rest of europe via the nord stream 1 pipeline his comments came partially in response to germanys decision last month to block the certification of the highly contentious nord stream 2 gas pipeline along with the barrage of economic sanctions that have been imposed by western powers since aimed at crippling the russian economy the us announced earlier this week that it will ban all imports of russian oil and gas while the uk suggested it will phase out imports by the end of the year the european union has plans to cut russian gas imports by twothirds but its move isnt quite as severe in large part because of its heavy reliance on russian energy the euro area generates around a quarter of its energy from natural gas while russia accounts for around onethird of the blocs imports any further gas import disruptions could therefore have significant knockon effects for euro zone economic output and inflation according to goldman sachs in a research note monday goldmans chief european economist sven jari stehn and his team set forth several scenarios and assessed how they might impact the european economy these included one scenario in which there are no further supply disruptions beyond the flow reduction underway since last september another in which gas imports through ukraine cease for the remainder of the year and a third in which all russian pipeline imports to europe are halted throughout 2022 by mapping physical gas supply constraints and upwards price pressures into gva gross value added effects in the euro area and the uk we estimate that for 2022 as a whole high gas prices could weigh on euro area gdp growth by 06pp percentage points and the uk by 01pp relative to our baseline forecast if we assume no further gas supply disruptions stehn said the impact in germany is likely to be even greater 09pp stehn added due to its high reliance on russian gas the scenario in which russia stops all pipeline exports could see euro area gdp growth fall by 22pp in 2022 relative to our baseline forecast with sizable impacts in germany 34pp and italy 26pp on the inflation front the scenario in which gas flows through ukraine are halted would add 07 percentage points to goldman sachs euro area inflation forecast at its peak in december 2022 if gas prices rise further due to gas pipeline flows from russia being shut down our headline inflation forecast could be up to 13pp higher with likely also significant passthrough into core prices stehn said in the uk we expect a range of 22 to 90 for the october price cap under the three scenarios signaling twosided risk around our current assumption of 55 the uks energy price cap will be reviewed by the countrys regulator in october from april 1 this year the cap is set to rise by 54 from its previous level to £693 906 per year to account for soaring energy prices even before russias invasion of ukraine goldmans baseline assumption is for another 55 rise to be announced in october with a 90 increase possible in the event of a total import shutdown the prospect of further spikes in energy prices have fueled fears of a stagflation period in which the global economy is beset by high inflation alongside slow economic growth and high unemployment given russias reliance on exports to europe and its evershrinking sources of revenue elsewhere in light of the suite of international sanctions bca research strategists suggested in a note wednesday that a complete stoppage was unlikely although moscow forged a new deal with beijing last month to supply chinas cnpc with an additional 10 billion cubic meters of gas a year the new planned pipeline to carry these supplies will take two to three years to complete said mathieu savary chief european strategist at bca research