K wholesale gas prices hit a record high before falling after Russia said it was boosting supplies to Europe.
Russia President Vladimir Putin intervention appeared to calm the market.
Prices had risen by 37 per cent in 24 hours to trade at 400p per therm on Wednesday.
UK gas was 60p per therm at the start of the year, but high global demand and reduced supply has driven the cost up.
The high price of wholesale gas has seen several UK energy firms collapse and halted production across industries.
Following Mr Putin’s comments on supplies, gas prices dropped to about 257p a therm later on Wednesday.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the changing gas prices underlined the “volatility in the market and the nervousness amongst investors about low stockpiles of gas across Europe”.
She added: “When Putin’s promises help calm the storm of rising prices which was pummelling financial markets, it’s clear investors are desperate for any gust of good news blowing in.”
London’s FTSE 100 settled at just below the 7,000 mark on Wednesday following a bruising session that at one point took it more than 130 points lower.
Financial analyst Danni Hewson, of AJ Bell, said: “News that Russia will boost gas supplies has steadied market nerves a little this afternoon and helped temper those record price hikes but businesses are worried, and investors are too.”
The surge in prices led to Energy Intensive Users Group, which represents steel, chemical and fertiliser firms, calling on the government to help keep businesses and industries running.
Industry leaders said surging costs had already resulted in steel production halting “at times of peak demand”.
Last month, US-owned CF Industries shut two UK sites that produce 60 per cent of the country’s commercial carbon dioxide supplies because of the rise in gas prices, before the government stepped in to meet its operating costs for its Teesside plant for three weeks.
The shutdown led to a shortage of carbon dioxide – a by-product of the fertiliser factories – which sparked warnings from food producers and supermarkets of shortages in the supply of fresh produce. The gas is to stun animals for slaughter and in packaging to prolong shelf life.
Besides industry struggles, a total of nine energy suppliers have collapsed in recent weeks, which has affected nearly 1.73 million customers in September alone.
The companies that have gone bust have been mostly smaller firms, which have been unable to deliver price promises to customers because of the surge in gas prices.
Firms going bust has also had a knock on effect to auto-switching services, with Look After My Bills, famous for its popularity on BBC Two’s Dragon’s Den, “pausing” its operations, and fellow auto-switching company Flipper closing down completely.
A Department for Business, Energy and Industrial Strategy spokesman said: “We are determined to secure a competitive future for our energy intensive industries and in recent years have provided them with extensive support, including more than £2 billion to help with the costs of energy and to protect jobs.
“Our exposure to volatile global gas prices underscores the importance of our plan to build a strong, home-grown renewable energy sector to further reduce our reliance on fossil fuels.”