Energy Market - A summary of the latest intelligence
Conflict in the Middle East has pushed global gas markets sharply higher. UK gas and power prices reached recent peaks as traders reacted to the uncertainty around supply. Most of the immediate gains are in contracts for this summer, although winter pricing is also being supported by concerns about storage and future availability.
The situation has drawn attention to how dependent global LNG (Liquefied Natural Gas) trade is on the region. Qatar, one of the world’s largest LNG exporters, has declared Force Majeure on some agreements after threats to shipping routes increased risks for vessels. Many insurers pulled 'war risk' cover for ships moving through the Strait of Hormuz, making almost all LNG voyages commercially unworkable. About 20% of global LNG shipments normally pass through this narrow route, so even a short disruption can have a major impact on international prices.
Qatar’s storage sites are now backed up, which has slowed further production. Restarting LNG operations is not straightforward because liquefaction equipment cannot simply be switched off and on. Even if tensions eased immediately, it would take weeks or months for output to recover. Earlier weather‑related delays and drone activity also added to the uncertainty. With limited visibility on how the conflict will evolve, it is difficult to judge whether prices have further to rise.
PPA pricing has moved higher as a result of the recent volatility. Many generators are now seeing export rates comfortably above FIT levels.
Europe is feeling the effects more heavily than usual because gas storage levels are the lowest they have been in five years. Although Europe does not rely heavily on direct LNG imports from Qatar, any global supply squeeze pushes up competition for available cargoes. Countries in Asia and Europe end up bidding against one another, and this quickly tightens the market.
Lower renewable output has added to the pressure. When wind generation drops, more gas plants are required to meet demand, which pushes electricity prices higher. The UK saw this effect recently as both gas and power prices jumped while renewable production fell.
Europe’s reliance on LNG has grown since the reduction of Russian pipeline gas. The current situation has made it harder for buyers to secure volumes for storage refilling ahead of next winter. If disruptions continue, Europe may struggle to rebuild stock levels in time, which would prolong market volatility.
The conflict has arrived at a difficult moment for consumers and industry. Energy affordability, storage capacity and supply security were already key concerns. Any extended disruption in Middle Eastern shipping routes is likely to keep prices high and maintain strong demand for alternative supply sources. The UK and Europe may both need to rely more heavily on storage management, domestic generation and diversified supply routes until conditions stabilise.
