Energy Market Update – 16 June 2025
Energy prices moved sharply higher across the board as the conflict between Israel and Iran escalated, with concerns over Middle East supply routes and Norwegian maintenance compounding bullish sentiment in both gas and power markets.
Gas prices climbed significantly on Friday and into Monday amid renewed fears over supply security. Missile and drone strikes between Israel and Iran raised the risk of disruption to critical infrastructure, with Israeli attacks reported near Iran’s South Pars gas field. A fire at the site led to the loss of 12 mcm/day of production. The potential for conflict to affect shipments through the Strait of Hormuz—handling around 20 million barrels of oil per day and significant LNG volumes—has added to supply fears. Israel also shut production at its Leviathan and Karish offshore gas fields, which supply gas to Egypt. This has prompted expectations of increased LNG demand from Egypt, potentially drawing cargoes away from Europe.
In Europe, added pressure came from the European Commission’s upcoming legislative proposal to ban new Russian gas contracts, aiming for a full phase-out by 2027. While demand was falling due to warmer weather, lower wind generation drove up gas-for-power demand, limiting the impact of declining consumption. On the supply side, flows from Norway were constrained by heavy planned and unplanned maintenance across key pipelines such as Langeled and Vesterled. UK pipeline imports continued to fall, with total Norwegian exports to the continent around 253 mcm/day. NBP day-ahead gas rose to 91.00p/therm, while the TTF front-month climbed to €38.58/MWh. Seasonal contracts also surged; Winter 2025 NBP rose to 100.69p/therm, up 3.98p from Friday.
Power prices followed gas higher, supported by reduced renewable generation and geopolitical uncertainty. UK wind generation dropped to 7.2 GW on Friday, nearly halving from Thursday’s levels, while solar output and interconnector imports increased marginally to offset the shortfall. UK baseload day-ahead settled at £73.87/MWh, while Winter 2025 contracts rose to £91.21/MWh, an increase of £3.08. Power generation data showed Combined Cycle Gas Turbines (CCGT) continuing to dominate the UK mix, with intermittent renewables underperforming expectations. The upward movement in power prices is expected to continue, tracking gas market volatility and weather-driven generation patterns.
Other commodity markets also reflected the rising geopolitical tension. Brent crude surged 7.02% over the past day to settle at $74.23/bbl, driven by risks to oil transit through the Strait of Hormuz. The conflict has stirred fears of major supply disruption from regional exporters including Kuwait, Iraq, and Saudi Arabia. Coal prices rose modestly, with ARA CIF Cal-26 contracts settling at $108.18/tonne, up $2.39. Carbon markets showed moderate gains, with EUA December 2025 allowances up 0.55% to €75.94/tonne and UK ETS contracts reaching £54.56/tonne. LNG prices also strengthened, with Asian JKM M+1 rising to $13.38/MMBtu, as global buyers remain wary of potential dislocation in supply chains amid the ongoing regional conflict.