Energy Market Report - 02 March 2026
Energy markets were engulfed by geopolitical risk on Monday after coordinated US and Israeli strikes on Iran over the weekend triggered retaliatory action across the region, effectively closing the Strait of Hormuz and halting Qatari LNG production at Ras Laffan. Gas and power surged across the curve, while carbon continued its recent policy-driven decline.
Natural Gas
The NBP Apr-26 contract opened around 98p/therm - up more than 26% on Friday's 78.57p/therm settlement - and briefly breached 100p/therm before reports confirmed QatarEnergy had suspended output at Ras Laffan following strikes on the terminal. By the afternoon, indicative levels had pushed to around 115p/therm. TTF front-month mirrored the move, opening near €38.45/MWh before climbing further as the Strait of Hormuz was confirmed closed to vessel transit, with at least three ships reportedly attacked. The Strait handles roughly 20% of global LNG and oil supply annually, and Kpler ship-tracking data showed vessels diverting from Sunday afternoon. President Trump indicated operations could continue for up to four weeks, suggesting this is not a short-lived scenario.
Underlying fundamentals were somewhat more benign. UK system demand sat around 200 mcm/day, temperatures are forecast above seasonal norms through March, and European storage - while low at around 30% full - was not under immediate pressure given the mild outlook. Norwegian exit nominations held at roughly 315 mcm/day, and UK LNG send-out was healthy with South Hook at 36 mcm/day and Dragon at around 20 mcm/day. Curve contracts rallied hard but with diminishing intensity further out: Summer 26 NBP moved from around 76.66p/therm to above 103p/therm, while Winter 26 rose from 80.66p/therm to roughly 95.50p/therm. Summer 27 and beyond saw smaller gains of 4-5p/therm, reflecting the market's view that a sustained multi-year disruption remains a tail risk.
Electricity
UK power tracked gas sharply higher. The baseload front-month opened around £83/MWh - up roughly 16% on Friday's £71.97/MWh settlement - and by the afternoon had reached offer levels near £96.75/MWh. German baseload opened at €80.80/MWh, up around 10%, and continued to push higher. Declining wind generation compounded the bullish impulse, with forecasts showing below-normal output across northwest Europe for the next two weeks, lifting residual thermal load at a point when gas prices are already elevated. UK wind output reached around 14 GW on Monday but is expected to fall from tomorrow.
Nuclear availability remains significantly constrained. Heysham 1 Unit 1 entered a planned 15-day outage today, adding to existing losses at Hartlepool Unit 2 (out since June 2025), Torness Unit 2, Heysham 1 Unit 2, and Heysham 2 Unit 7. System buy prices spiked to £113.40/MWh during the morning, highlighting how thinly balanced the system is running. Further planned outages at Torness Unit 1 and Heysham 2 Unit 8 are scheduled for April and May, offering little near-term relief.
Other Commodities
Brent crude rallied roughly 8% to around $78.60/bbl - its highest level since January 2025 - after reports that Saudi Arabia had shut its largest domestic oil refinery following strikes in the area. OPEC+ agreed to increase production by 206,000 barrels per day from April, though this is modest and will do little to offset the loss of Hormuz transit volumes if the closure persists. Coal was largely unchanged, with ARA CIF Cal-27 at $113.92/tonne on Friday.
Carbon
EUA Dec-26 traded below €70/tonne, extending the recent bearish trend driven by senior European politicians openly criticising the ETS and calling for reform. UK ETS Dec-26 settled at £46.14/tonne on Friday and drifted to around £45.06 by the afternoon. The disconnect between surging gas and power and declining carbon is notable - it suggests the market views carbon weakness as structurally driven by policy risk rather than cyclically linked to this week's price action.
Outlook
The key variables ahead are the duration of the Strait of Hormuz closure, the timeline for any Qatari LNG restart, and whether the conflict widens or moves toward de-escalation.