Increased geopolitical instability drives prices up
Prices react to a new wave of geopolitical instability in the Middle East.
The Winter 26 frontseason contract rose to its highest closing price since 20th May, after breaking through psychological resistance at 120p/therm and closing at just over 125p/therm (4.3p/kWh).
Several nights of strikes have put market participants on edge and inflated risk premiums across the curve.
Overnight into Tuesday, we have seen intensifying conflict in and around the Strait of Hormuz, putting the ceasefire and near-term peace prospects under extreme scrutiny and both sides blaming one another for derailing existing progress.
This morning, Winter 26 has continued its rally, now holding very close to 130p/therm (4.4p/kWh). The direction from here remains unclear as participants carefully assess a wide variety of driving factors.
A significant improvement in wind generation when compared to Friday’s session was unable to outweigh soaring risk premia from the re-emergence of active conflict across the Persian Gulf.
According to data from Elexon, wind power rose from just 2.7GW on Friday to 8.8GW on Monday, a 28.9% share of the GB power mix. Gas (CCGT) output fell from 12.6GW to 5.5GW over the same period, a share of just 18.1%.
A bullish wider energy complex continues to be the main driver behind increases to baseload power prices.
Overnight we have seen the benchmark contracts for NBP Natural Gas, Brent Crude, Carbon EUAs and Rotterdam Coal rise by 5.5%, 9.6%, 1.1% and 3.6%, respectively, with events in the Middle East having a ripple effect across global energy markets.
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Price commentary courtesy of Crown Gas and Power 