In spite of the Strait of Hormuz remaining closed and the last Qatari LNG cargoes having now arrived in Europe, with very little clarity on when supplies might resume, gas and power prices have fallen sharply. Last week there was optimism that diplomatic efforts to end the conflict via the intermediation of Pakistan, might bear fruit. This week, Trump said he might end the war without reopening the Strait and then today said the war would end in two to three weeks.
Whereas only a few days ago there had seemed to be a realistic prospect of ground troops being used, these recent comments from Trump could be an acknowledgment of what has been clear for some time: reopening the Strait militarily is very challenging (click here for a Royal United Services Institute report on this). If this means a diplomatic solution will be found instead, this might sound positive, but why would Iran agree to US terms if it thinks Trump is about to pull out anyway? However, today, in a social media post claiming that Iran had asked for a ceasefire (which Iran denied), Trump said he would be consider a ceasefire only when the Strait is reopened. Does this mean Trump might still go through with his threat to attack power plants, oil production and other civilian infrastructure if the 6th April deadline for reopening the Strait is not met. Were that to happen, Iran’s reaction might be to carry out an attack similar infrastructure in Gulf states. We saw that at the weekend when attacks on Iranian steel plants led to Iranian attacks on aluminium smelters in the UAE and Bahrain. On the other hand, ending the war and leaving the Strait of Hormuz under effective Iranian control, would be disastrous for energy markets and the World economy and of course would in many ways, leave the Iranian government in a stronger position than at the start of the war.
Consequently, the situation is very confused and perhaps the best hope is that the efforts of Türkiye, Egypt, Saudi Arabia and Pakistan supported by a larger collation of over thirty countries being organised by the UK, might be able to dissuade the US from attacking Iranian energy infrastructure and find a workable solution with Iran to reopen the Strait that satisfies the US. However, as the war drags on, disruption continues. Qatar Energy has extended its force majeure throughout May. On top of this, a cyclone in Australia has damaged LNG production facilities there, further curtailing supply by the equivalent to 8% of world output. It is perhaps surprising therefore, that European gas and power markets have fallen so far in recent days.
It has been very windy over the last week – indeed a new wind output record was set in the UK. Having died down now, the wind is forecast to pick up again over the remainder of the week and into the weekend and blustery conditions continue next week as another low-pressure front comes though. Later in the month conditions maybe more settled.
| Commoditiy | Front contract (£p/therm) | Summer 26 (£p/therm) | Winter 26/27 (£p/therm) | Summer 27 (£p/therm) |
|---|---|---|---|---|
| Price | 120.42 | 137.13 | 121.10 | 90.86 |
| Weekly Change | -12.35 | -4.30 | -13.31 | -6.45 |
| Commoditiy | Front contract (£/MWh) | Summer 26 (£/MWh) | Winter 26/27 (£/MWh) | Summer 27 (£/MWh) |
|---|---|---|---|---|
| Price | 97.09 | 102.44 | 102.23 | 77.77 |
| Weekly Change | -1.57 | -1.36 | -1.65 | -0.29 |
| Commoditiy | US Gas ($/mmbtu) | Brent ($/b) | EUA (€/MT) | UKA (£/MT) |
|---|---|---|---|---|
| Price | 2.80 | 101.39 | 73.60 | 42.49 |
| Weekly Change | -0.16 | -0.83 | 3.86 | 4.50 |
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