Slow progress securing solution for safe passage via Strait of Hormuz affects prices

A fairly bullish session on Friday saw key contracts close the week with net gains.

Slow progress towards securing a longer-term solution for safe passage via the Strait of Hormuz appears be to reintroducing some geopolitical risk premium into the market.

Negotiations between the US and Iran were reportedly showing signs of stalling by the end of the week, while market participants remained cautious over the potential for further disruption.

Although the number of vessels transiting the narrow waterway has recovered from recent lows, traffic remains materially below the levels seen before the conflict began, highlighting the persistence of underlying supply-side concerns.

Generation fundamentals continued to fluctuate significantly on Friday.

Thursday’s surge in wind power proved short-lived, with turbine output falling by around half over the course of the following day.

As a result, imports emerged as the single largest source of electricity supply to the grid, narrowly overtaking wind generation.

According to Elexon data, imports – predominantly from France and Norway – accounted for 24.8% of the GB generation mix, compared with 24.4% for wind.

Gas-fired generation remained notably subdued, contributing just 13.1% of total supply.

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Price commentary courtesy of Crown Gas and Power