European stocks, euro tumble as Russia fuels energy crisis

European stocks tumbled Monday and the euro hit a new 20-year dollar low on energy crisis fears, after Russia said it would not restart gas flows to Germany and effectively most of the continent.

Natural gas prices spiked almost a third, while oil rallied on expectations OPEC and its Russia-led allies could decide at a meeting Monday to lower crude output in a bid to lift prices.

Europe's fast-moving gas crisis sent Frankfurt equities slumping more than three per cent before trimming losses, while Paris shed two per cent at one stage.

London stocks also lost ground before the much-anticipated announcement of Britain's next prime minister at around 1130 GMT.

'Weaponisation of energy'

"Russia's ongoing weaponization of energy supplies continues to increase downside risks for European economies and the euro," said Lee Hardman, currency analyst at financial services group MUFG.

The euro sank Monday to $0.9878, its lowest since December 2002, despite expectations the European Central Bank will hike interest rates again Thursday to combat soaring inflation.

The shared eurozone unit has collapsed by about 13 per cent against the dollar since the start of the year, hit also by the US Federal Reserve's more aggressive monetary tightening.

State gas giant Gazprom announced late Friday the key Nord Stream pipeline would remain shut indefinitely, blaming leaks.

Gazprom's announcement came the same day as the G7 nations said they would work to quickly implement a price cap on Russian oil exports, a move that would starve the Kremlin of critical revenue for its war on Ukraine.

Resumption of deliveries via the pipeline, which runs from near Saint Petersburg to Germany under the Baltic Sea, had been due to resume on Saturday after what Gazprom had described as three days of maintenance work.

The news intensified an energy crisis caused by Europe's sanctions on Moscow for its invasion of Ukraine in February.

Investors are fearful of an energy supply crunch during the peak-demand northern hemisphere winter.

That could potentially lead to a painful recession.