Middle East Conflict: Energy Market Surge as Strait of Hormuz Closes

Middle East Conflict – Energy Market Update
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3rd March 2026

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Market Overview

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Extreme volatility continues across global energy markets as tensions escalate in the Middle East.

Fresh developments surrounding the Strait of Hormuz and regional energy infrastructure have driven sharp price movements across gas, power and oil markets. Markets are now pricing in the risk of prolonged supply disruption and restricted global energy flows.

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Natural Gas Markets

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European gas markets have surged sharply again today.

The NBP front-month contract is trading around 139.00 p/th, up approximately 25% on the previous session. Compared with Friday’s close, prices have risen by around 78%.

The equivalent TTF front-month contract is pricing near 54.40 €/MWh, up 24% on the day and roughly 73% higher than Friday’s close.

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Key Drivers

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• Qatar has shut down the Ras Laffan LNG facility following a reported drone strike.
• Iran has stated that the Strait of Hormuz is closed and warned vessels attempting to pass may be targeted.
• A tanker was reportedly attacked within the Strait.
• Shipping traffic is heavily restricted, with vessels positioned at either end of the waterway awaiting clarity.

The Strait of Hormuz is one of the world’s most critical energy transit routes, with approximately 20% of global oil and LNG flows passing through it daily. A sustained closure would significantly tighten global supply and increase competition for LNG cargoes.

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Storage & Winter 2026 Risk

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Market focus is shifting toward Europe’s ability to refill gas storage ahead of Winter 2026.

The Sum-26 contract is now trading at a significant premium to Win-26, discouraging summer injection. Europe remains heavily reliant on LNG imports to rebuild storage levels, and global LNG markets would tighten materially if Ras Laffan remains offline or the Strait stays closed for an extended period.

This raises the risk of elevated forward pricing and sustained volatility across winter contracts.

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Power Markets

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European power markets have followed gas higher.

The UK Baseload front-month contract is trading around 113.15 £/MWh, up approximately 24% on the day.

The German Baseload equivalent is pricing near 99.30 €/MWh, up 14% on the previous session.

Wind generation across North West Europe remains below seasonal norms and is forecast to stay weak for the next two weeks. Reduced renewable output is increasing gas-for-power demand, adding further support to wholesale electricity prices.

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Oil & Carbon Markets

Brent crude is trading around 80.95 $/bbl, up approximately 11% since Friday and at levels not seen since January last year.

Carbon EUAs remain under pressure following ministerial comments regarding potential reform of the Emissions Trading System. The Dec-26 EUA contract continues to trade just below the 70.00 €/t CO2e level.

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Summary of Events

• Iran announced that the Strait of Hormuz is closed and warned that ships attempting to transit may be fired upon.
• The Strait is the world’s most vital oil export route, connecting major Gulf producers including Saudi Arabia, Iran, Iraq and the UAE.
• The closure follows US and Israeli strikes on Iran in late February.
• Iran has launched retaliatory missile attacks targeting Gulf states hosting US military bases.
• Approximately 20% of global daily oil consumption passes through the Strait, which is just 33 kilometres wide at its narrowest point.
• Shipping disruptions add to existing instability across global maritime trade routes.

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What This Means for UK Businesses

The market is currently pricing in severe geopolitical risk and supply disruption.

While the physical duration of the closure remains uncertain, volatility is elevated and further price swings are likely.

Businesses with upcoming contract renewals or exposure to wholesale pricing should review procurement strategy carefully and consider risk management options.

Advantage Utilities continues to monitor developments closely and will provide further updates as the situation evolves.

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Disclaimer

The information and insights presented here are for general informational purposes only and do not constitute financial, investment or procurement advice. While every effort is made to ensure accuracy, market conditions can change rapidly and past trends are not guarantees of future performance.

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