Gas Market
UK gas contracts opened higher on Monday, holding a premium to Friday’s close but failing to fully recover prior losses, with the front-month settling at 101.31p/th. Prices were supported by geopolitical uncertainty as a fragile Iran ceasefire held despite negative weekend developments. Initial optimism after Iran reopened the Strait of Hormuz quickly faded after Tehran moved to restrict flows again when the U.S. refused to lift its blockade on Iranian ports, effectively tightening regional LNG supply expectations. Further support came from renewed U.S. threats targeting Iranian energy infrastructure, alongside Iran’s reluctance to return to negotiations. Gains eased slightly later in the session amid signs of softer rhetoric from both sides and tentative expectations that talks could resume in the coming days.
Power Market
Following renewed tensions in the Middle East over the weekend and the effective re-closure of the Strait of Hormuz, GB baseload power prices recovered some of Friday’s losses. Strength in the UK gas market lifted the May-26 baseload contract by £2.00/MWh to settle at £84.50. Further along the curve, gains were more limited, with weaker UKA carbon prices offsetting the bullish gas impact. The Summer-27 baseload contract rose by just £0.63/MWh, despite a 2.3% increase in the corresponding gas contract.
Carbon prices reversed some of Friday’s gains on Monday as the spot EUA contract shed €0.96/tonne. Carbon prices had surged on Friday following news of the Strait of Hormuz reopening, but the optimism proved short lived as the strait closed again less than a day later.
Oil Market
The front-month Brent crude contract climbed to $95.48/bbl on Monday, rebounding sharply after last week’s selloff as renewed tensions between the U.S. and Iran revived concerns over supply disruptions through the Strait of Hormuz. The brief optimism following news that the waterway would remain open during a ceasefire has faded, with shipping activity dropping back to minimal levels and geopolitical risks once again dominating market sentiment. With a key ceasefire deadline approaching and uncertainty lingering over potential negotiations, traders are increasingly focused on the risk of prolonged constraints to flows through the strait, which handles a significant share of global oil shipments. While some analysts note prices remain below the peaks seen earlier in the conflict and could ease without further escalation, others warn that continued disruption to transit and logistics may keep a risk premium embedded in crude markets in the near term.
Markets this morning
UK gas prices eased in early trading this morning, retracing part of Monday’s gains as renewed optimism emerged over potential U.S.-Iran talks ahead of the expiry of the two-week ceasefire. The May-26 front-month contract is down 1.00p/th at 100.34p/th as expectations build for a possible extension to the truce. Activity further along the curve remains subdued, with participants awaiting clearer signals on the geopolitical outlook. Oil markets are also trading cautiously, with the Strait of Hormuz effectively remaining constrained as negotiations continue, keeping a risk premium in place given its role in transporting around 20% of global crude flows.
