Energy Market Report - 04 March 2026
Energy markets remained sharply elevated as the Middle East conflict entered its fifth day, though the extreme volatility seen earlier in the week showed signs of moderating as mild weather and comfortable UK fundamentals provided a partial counterweight to geopolitical risk.
Natural Gas
The disruption to shipping through the Strait of Hormuz continued to dominate gas pricing, with Iran's threat to strike vessels transiting the waterway curtailing Qatari LNG exports and raising the prospect of a prolonged shortfall in European supply. NBP day-ahead settled at 137.00p/therm on 3 March - up roughly 83% from Friday's close - with Wednesday morning pricing around 142p/therm showing only a modest further advance. Overnight, President Trump announced government-backed insurance for maritime trade through the Gulf and signalled that US Navy escorts could follow, while President Macron stated that France is leading a coalition to secure the passage. These diplomatic moves offered some reassurance, but until shipping resumes normally the risk premium is unlikely to dissipate. Further along the curve, Wednesday morning saw a notable pullback from Tuesday's highs, with Sum-26 NBP offered around 132p/therm (down 15p day-on-day) and Win-26 at 115.50p/therm (down 8p). TTF followed a similar trajectory, with the front month around 55 EUR/MWh after having breached 60 EUR/MWh resistance in previous sessions before retreating.
UK system fundamentals remain relatively benign. System demand came in around 210 mcm/day on Wednesday morning - roughly 70 mcm below seasonal normal - with the system opening 26 mcm long. Temperatures are above average and longer-range forecasts suggest mild conditions could persist through the end of March. Norwegian flows to the UK picked up for a second consecutive session, with Langeled nominating 73 mcm/day and total Norwegian flows at around 93 mcm/day. LNG terminals continue to deliver steadily - Dragon at 18.9 mcm/day, South Hook at 26.5 mcm/day and Isle of Grain at 9.1 mcm/day - though the medium-term outlook for arrivals is clouded by the Strait disruption. EU storage stood at roughly 29.9% fullness, below the year-earlier level of 32.2%. While mild weather is moderating withdrawal rates, the potential loss of Qatari cargoes raises questions about the pace of summer restocking, with European buyers likely to lean harder on US and other Atlantic-basin exporters if the disruption persists.
Electricity
Power markets tracked gas higher, with UK baseload day-ahead settling at 121.56 GBP/MWh on 3 March and the front month pricing around 113.25 GBP/MWh on Wednesday morning - up roughly 42 GBP/MWh from Friday's close. The UK market has been disproportionately affected given its limited storage capacity and heavy reliance on gas-fired generation. Continental baseload markets rose less sharply, with German front-month baseload at around 102 EUR/MWh. Wind speeds held below seasonal normal this week, providing a secondary source of support to prompt pricing, although mild temperatures have kept demand muted and strong solar generation across Europe has partially offset the loss in wind output. UK wind and solar forecasts remain below seasonal norms into next week before recovering.
Nuclear availability has deteriorated further. Heysham 1 Unit 1 entered a fresh planned outage on 2 March, adding 610 MW of unavailability to an already stretched fleet. Combined with ongoing unplanned losses at Hartlepool Unit 2 (offline since June 2025), Torness Unit 2 (planned outage since January), and Heysham 2 Unit 7 (unplanned since February), total offline nuclear capacity is now well in excess of 2 GW, adding to gas-for-power burn at precisely the wrong time. On the curve, movements were mixed - Sum-26 baseload edged up to 117.00 GBP/MWh while Win-26 dropped to 96.00 GBP/MWh, with indicative offers retreating to around 94 GBP/MWh by Wednesday morning, suggesting the market is sceptical about whether the full geopolitical premium in gas will persist into seasonal contracts.
Other Commodities
Brent crude settled at $81.40/bbl, up $3.66 day-on-day and around 15% higher on the week, with the market holding onto gains despite US and French moves to secure the Strait. The conflict has injected a substantial risk premium into crude, though the focus remains on the chokepoint rather than any damage to production infrastructure so far. Coal ARA CIF Cal-27 surged to $126.41/tonne, up 4.5% on the day and 13.4% week-on-week, reflecting the broader energy complex rally and improved coal-fired generation economics as gas and power prices spike.
Carbon
EUA Dec-26 settled at EUR 73.33/tonne, up 3.9% on the day and broadly in line with the wider complex. UK ETS Dec-26 was at GBP 46.04/tonne, up GBP 0.92. The UKA-EUA spread remains wide and carbon pricing continues to take its cue from the gas-driven generation stack rather than any standalone policy catalyst. Sterling held relatively steady at GBP/USD 1.3354 and GBP/EUR 1.1472.
Outlook
The near-term trajectory remains almost entirely hostage to developments in the Strait of Hormuz. Comfortable UK fundamentals - mild weather, strong Norwegian flows and active LNG terminal deliveries - are providing a floor of stability, but the potential loss of Qatari LNG cargoes poses a material risk to European summer restocking plans, particularly with EU storage already running below year-earlier levels. The US and French measures to protect maritime trade are supportive in tone but lack operational clarity, and Iran's posture has not softened. Markets are likely to remain highly volatile and reactive to any escalation or de-escalation, with the pullback on the curve from Tuesday's extremes suggesting traders are beginning to differentiate between a temporary disruption and a structural supply loss. Until shipping normalises, prices will stay well above pre-conflict levels, and the UK's constrained nuclear fleet and below-normal wind generation leave the system particularly exposed to any further tightening in gas supply.