Apr26 Energy Market BriefMar26 Energy Market Brief: Markets React To Geopolitical Risk

March 2026 saw UK energy markets continue to take their lead from the themes that became firmly established through January, with volatility driven less by short-term weather swings and more by structural concerns around supply, storage and geopolitical risk.

Gas remained the dominant driver throughout the month. The tightness we began to see in January has not eased, with storage levels still sitting well below seasonal norms and creating an underlying sense of risk in the prompt and near-term contracts. While there were periods of relative stability, particularly during milder weather windows, the market consistently found support on any dips.

Traders remain acutely aware that injections through the summer will need to be strong to avoid further pressure ahead of Winter 26, and that concern is now being priced in more confidently than earlier in the year.

Power markets followed a similar pattern, with gas continuing to set the direction. Clean spark spreads remained under pressure at times, but the broader trend was one of resilience in pricing rather than any meaningful correction. Renewable output did provide some intermittent relief, particularly during windier periods, but not enough to shift the overall market sentiment. The structural reliance on gas-fired generation continues to limit downside in power pricing, especially across the front end.

Looking further along the curve, the contrast between short-term and longer-dated pricing remains a key feature. As we saw developing in January, the front of the curve continues to carry the bulk of the risk premium, while further-out contracts are comparatively less reactive.

This reflects a market that is still trying to balance immediate supply concerns with a longer-term outlook that assumes some level of normalisation, whether through improved LNG flows, storage recovery or demand-side adjustment.

Geopolitics has also continued to play a role in shaping sentiment. Any developments impacting global gas flows or LNG availability have been quickly reflected in pricing, reinforcing just how sensitive the UK market remains to international dynamics. While not always resulting in sustained price moves, these events have contributed to the underlying volatility and the reluctance of the market to trend decisively lower.

From a procurement perspective, the conditions seen through March reinforce the importance of strategy and timing. The opportunities to capture value have tended to be short-lived, often appearing during brief pullbacks rather than sustained downward trends. This is very much in line with what we flagged earlier in the year, where a reactive and layered approach is better suited to current market conditions than trying to call a definitive bottom.

In summary, March has built on the foundations laid in January, with a market that remains fundamentally supported, intermittently volatile, and heavily influenced by gas. Until we see a clear shift in storage dynamics or a meaningful easing in global supply concerns, it is difficult to justify a sustained move lower. For now, the balance of risk still feels weighted to the upside, particularly across the near-term contracts, and that is likely to remain the case as we move into the injection season.

Finally, the ongoing Iran conflict continues to act as a key upside risk to energy markets, with disruption through critical routes such as the Strait of Hormuz reinforcing a persistent risk premium in both oil and gas prices, particularly while the duration and potential escalation of the situation remain uncertain.