Energy commodities reacted strongly on Friday morning to the news that Israel had attacked Iranian nuclear and military targets overnight.

Gas Market

NBP contracts reacted strongly on Friday morning to the news that Israel had attacked Iranian nuclear and military targets overnight, stirring unrest in the region. Retaliatory drone strikes from Iran and further attacks from Israel later in the afternoon ensured prices remained elevated throughout the session. Having reached an intra-day high of 91.23p per therm, the front month contract eased off slightly before the close to settle at 89.80p per therm, a gain of 4.91p day-on-day. Although the damage done to energy infrastructure was deemed “surface level” only, the upside came from the risk that the conflict could result in the shut-down of the Strait of Hormuz. The prompt market displayed similar strength, with the Day ahead contract gaining 4.30p day-on-day to close out the week at 90.50p per therm.

Power Market

GB Baseload prompt prices edged up on Friday, supported by below-average wind output. Despite forecasts for warmer temperatures the Day ahead contract posted a day-on-day gain of £9.00/MWh to settle at £87.75/MWh. Further out, the strong gains experienced by the NBP gas market curve lifted the Baseload near months, with the front month contract increasing by £2.75/MWh to close at £81.50/MWh. European carbon markets reached fresh 4-month highs on Friday, following the volatility across the wider energy complex caused by the attacks by Israel on Iranian nuclear and military targets. The Spot EUA contract closed at €74.91 a tonne, up €0.21 day-on-day.

Oil Market

Crude oil prices jumped to 10-week highs on Friday after Israel launched air strikes on Iran, targeting nuclear facilities and sparking concerns over a possible disruption to Middle East oil supplies. The front month Brent contract reached an intra-day high of $78.50 a barrel before edging back down to close at $74.23 a barrel, a gain of $4.87 day-on-day. Much of the upside is coming from concerns that Iran could retaliate beyond Israeli borders and potentially block the Strait of Hormuz, the world’s most important gateway for shipping oil. Rising oil production in the United States, Brazil, Canada, Argentina and other non-OPEC countries has reduced the global market share of the Middle East in recent years, which could help to mitigate any supply disruption. However, a continuation of the conflict will likely maintain the recent volatility.

Markets this morning

The ongoing conflict between Israel and Iran has continued to feed support into the NBP curve so far today. A reported fire at the Iranian South Pars gas field, the world’s largest, caused by an Israeli strike has raised concerns over global LNG supply and exacerbated supply risk. The front month contract has come down from an earlier high of 92.05p per therm to last go through at 91.61p per therm, up 1.81p on Friday’s close. The front month Brent contract has also come down from an earlier peak of $78.32 to last transact at $73.55 a barrel, down 68 cents day-on-day. Despite the modest decline, the ongoing attacks over the weekend has increased concerns that the conflict could widen and significantly disrupt oil exports from the Middle East.