Hormuz Is Back on the Risk Sheet — and UK Energy Buyers Need to Notice
There’s a particular kind of week in this market where every desk note reads the same, and this was one of them. Brook Green, Corona Energy, TotalEnergies and Shell Energy all opened their daily commentary in the last few days with the same story: renewed US-Iran hostilities, tankers hit in the Strait of Hormuz, and a curve that’s repricing risk it thought it had already absorbed.
If you’ve been half-watching the headlines rather than the desk chatter, here’s the catch-up — and, more importantly, what it means for anyone sitting on UK gas or power exposure heading into winter.
What actually happened
Weekend escalation between the US and Iran pushed into a ninth consecutive day of tit-for-tat strikes. Iran’s IRGC reported two oil tankers struck and disabled in the Strait of Hormuz, alongside claims that a southern smuggling route through the waterway had also come under attack. US Centcom confirmed strikes against Iranian military installations, coastal surveillance assets and communications infrastructure, in what it framed as retaliation following reports of US personnel killed in Jordan.
This isn’t the first flare-up this year — the Strait saw a much larger disruption back in the spring, when transit through the waterway effectively seized up for a period before a fragile normalisation took hold. What’s notable now is that the “de-escalation trade,” as one market strategist put it recently, is looking fragile again rather than settled. Reports late last week suggested Pakistan and Qatar were once more acting as intermediaries on a possible short-term ceasefire, and prices did retrace intraday on those headlines — before contradictory statements from both sides pushed the market straight back up by the close.
Brent has now put in its strongest monthly run since March, briefly testing $90/bbl and settling in the high $80s. That’s roughly a 23% gain for the month at time of writing.
Where UK gas and power landed
The knock-on into UK markets has been sharp and fairly mechanical:
NBP day-ahead pushed into the high 130s/low 140s p/th across the reporting window, with some desks flagging day-on-day moves in the high single digits.
UK baseload day-ahead power swung hard — one desk logged a fall of over 25 on the previous settlement before jumping back close to 29 on the current offer, which tells you more about liquidity than direction. The forward curve was more consistent: Q4-26 baseload sits around 120–125 £/MWh, Winter-26 around 118–122 £/MWh, both up several pounds week-on-week.
TTF followed NBP up, gaining comfortably over 1.5% across spot and front-month in the same window, and Asian JKM continues to sit at a material premium to European hubs — a reminder of where the marginal LNG cargo is actually going.
Carbon was the odd one out: EUA drifted slightly lower even as everything else in the complex rallied, while UK ETS ticked up modestly. That divergence is worth sitting with for a moment, because it isn’t really about gas at all — it’s about Brussels.
The other story: Brussels quietly rewrites the ETS rulebook
While the desks were consumed with the Middle East, the European Commission tabled its long-awaited reform of the EU Emissions Trading System on 17 July — the framework that will govern Phase 5 of the scheme from 2031 through 2040.
The headline change is a slower reduction in the annual emissions cap: the linear reduction factor drops from the current 4.3% to 3.7% for 2031–2035 and then to 1.7% from 2036, pushing the point at which allowances are fully exhausted out from 2039 to somewhere between 2046 and 2048. Free allocation for energy-intensive industry — currently averaging 85% of covered emissions — is set to run at roughly 78% for 2026–2030, with new conditions attached from 2031: 80% of free allowances tied to published decarbonisation investment plans, the remaining 20% only released once emissions cuts are actually verified. There’s also room for a limited use of international carbon credits from 2036, capped well below what industry groups had lobbied for, and a fast-tracked revision to the “fallback benchmarks” used to calculate free allocation — worth an estimated €6bn to industry on its own.
Read together with this week’s price action, the signal is: less regulatory pressure pushing carbon higher over the next decade than the market had been assuming, at exactly the moment geopolitical risk is doing the opposite job on gas and power. That’s a genuinely interesting divergence for anyone running a combined hedging book, and one I’d expect to see picked apart in more detail as the co-decision process between Parliament and Council gets under way over the next year.
Storage: the number that should worry you more than Brent
Buried under the geopolitics is a fundamentals story that hasn’t gone away. European gas storage is sitting in the low-to-mid 50s percent full, somewhere between 10 and 16 percentage points below both last year’s level and the five-year average, depending on whose numbers you’re reading. Injection rates continue to lag seasonal norms. One desk’s own modelling, based on historical five-year average injection pace from current levels, projects storage reaching only around 71–72% full by 1 October — a number that, in a normal year, wouldn’t raise many eyebrows, but against this year’s starting point and this year’s geopolitical backdrop, gives the market very little cushion heading into winter.
LNG isn’t picking up the slack the way it has in previous tight years. Flows into Northwest Europe have been running at 12-month lows, roughly a quarter below the 30-day average, with Pakistan and other Asian buyers bidding aggressively for spot cargoes and pulling flexible LNG away from Europe. Add China’s structurally uncertain long-term appetite — analysts reportedly see a possible 32 million tonne swing in Chinese LNG demand by 2035 depending on how fast gas-fired generation shifts from baseload to backup duty — and you have a market where the marginal cargo is genuinely contested, not just expensive.
The bit that matters for procurement decisions
None of this is a call to panic-buy forward positions on a Tuesday morning headline. But three things are worth holding in mind if you’re advising on, or making, UK gas and power purchasing decisions right now:
The risk premium in the curve is doing real work, not just noise. Winter-26 and Q4-26 forward prices have moved several pounds in a matter of days on geopolitical headlines alone, before any change in underlying UK fundamentals. That’s a market pricing tail risk, not a market repricing supply and demand.
Storage math leaves little room for a cold snap or a supply shock. A market entering winter already 10+ points behind on storage doesn’t have the same buffer it had in recent milder years — and the LNG market it would normally lean on is tighter than usual.
Carbon costs are becoming a slower-moving, more predictable input than gas. With the ETS reform pointing towards a gentler compliance trajectory through the early 2030s, the carbon line of a forward cost stack may be the one part of the curve you can actually plan around with some confidence — even as gas and power stay reactive to headlines out of the Gulf.
Worth watching this week
Whether the Pakistan/Qatar-brokered ceasefire talk resurfaces with anything more concrete than headlines.
EU storage injection data over the coming fortnight — the 71% projection by October is a base case, not a guarantee.
Early reaction from EU member states and Parliament to the ETS proposal; expect industry groups to push for even more flexibility, and NGOs to push back hard on the extended timeline.
French nuclear availability — Golfech-2 and Chooz-2 restrictions tied to river cooling-water temperatures have already been a bigger driver of continental power pricing than most people are giving them credit for.
That’s the ledger for this week. As ever, treat every number above as indicative and time-stamped — by the time you’re reading this, at least one of them will have moved.
— Asher Kilbride
The Energy Ledger is an independent read on UK energy markets, policy and the people who run them. If this was useful, the best thing you can do is share it with one other person in the industry who'd find it useful too.