Weekly Energy Market Update 

Despite bearish fundamentals for the remainder of the month, with much warmer-than-average temperatures across Europe and strong wind generation, gas prices have rebounded this week on renewed geopolitical risks. Summer 2026 gas has rallied around 15% from its recent lows, currently trading at 78.50 p/th, with power at £72.00/MWh. The move is largely driven by escalating tensions in the Middle East, combined with the lack of progress in Ukraine-Russia peace talks in Geneva. The risk premium across oil and gas markets could remain supported after Iran’s Fars news agency reported that Iran and Russia will conduct joint naval drills in the Sea of Oman and the northern Indian Ocean today. This follows recent Revolutionary Guard exercises in the Strait of Hormuz, reinforcing concerns around potential LNG supply disruptions. That said, assuming steady exports from the Middle East, we remainbearish, largely due to the expected increase in global LNG supply, with Golden Pass, for example, beginning to ramp up.

EU Parliament adopts new 2040 emissions reduction target.

The European Parliament adopted an agreement amending EU climate law, the EU is legally bound to reduce greenhouse gas emissions by 90% compared to 1990 levels by 2040. MEPs voted to amend the bloc's Climate Law and include a new intermediate reduction target, with up to 5% allowance for reductions from high-quality international carbon credits from 2036.

Another key change is the postponement of the Emissions Trading System expansion (ETS2) from 2027 to 2028. ETS2 will cover fuel combustion emissions in buildings and road transport.