Jul25 Energy Market BriefPrices Tick Up On Supply Concerns

Across the month, day-ahead gas registered a 4.2% gain month-on-month to average 86.31p/th. Similarly, front-month contracts registered price increases, up on average by 5.5% when compared to May, with July 25 seeing a 2.9% rise to 85.63p/th and August 25 growing 8.1% to 88.62 p/th.

Gas prices continue to experience bullish support from ongoing geopolitical developments, most notably the conflict in the Middle East, leading to volatility and supporting risk premiums across the market.

On 22 June, Iran’s state-run Press TV reported that Parliament had approved a plan to close the Strait of Hormuz after the US attacked three Iranian nuclear facilities, but noted that the final decision was down to the Supreme National Security Council. Because the Strait plays a key role in the global energy market, with almost 20% of the world’s oil and LNG passing through, any disruption to the supply transportation would have major ramifications on the global economy, pushing up gas prices.

Stronger gains were limited as US President Donald Trump announced a ceasefire between Iran and Israel on 23 June, with Iran’s state media confirming a ceasefire deal with Israel, acting to offset the concerns surrounding LNG and oil shipments through the Strait of Hormuz. Moreover, Israel resumed operations at its Leviathan gas field, further alleviating supply concerns from the region.

Looking ahead, seasonal gas contracts from winter 25 to winter 27 were, on average, 3.2% higher in June compared to May – as the phase-out of Russian gas continues to impact market volatility. Reports note that forcing EU importers to break gas and LNG supply contracts with Gazprom remains legally challenging, impacting the phase out of Russian energy.

Following previous announcements, on 17 June, the European Commission proposed a legally binding ban on EU imports of Russian gas and LNG by the end of 2027, including legal measures to ensure the plan cannot be blocked by EU members Hungary and Slovakia. This will act to tighten supply levels into Europe, increasing reliance on global LNG.

Following the bullish price direction set by its gas counterpart, most tracked power contracts saw gains across June, with day-ahead power prices the only exception to the upward trend.

Day-ahead prices registered a 6.4% loss month-on-month to average £72.54/MWh, with prices falling to the lowest level seen since August 2024 at £27.83/MWh on 2 June, due to strong wind generation forecasts at the time, with wind making up ~62% of the generation mix on 3 June.

Both front-month power contracts registered gains, as July 25 rose 1.2% to £77.17/MWh and August 25 grew 1.9% to £76.96/MWh as concerns over French nuclear supply are set to continue, with EDF cutting output at several reactors due to heatwave conditions impacting the temperature of water used for cooling.

Much like its gas counterpart, seasonal power prices saw a collective upwards movement – rising 2.3% on average.

Brent crude oil saw strong month-on-month gains, averaging $69.76/bl – up 8.8%. This came following airstrikes on Iran, which heightened concerns over potential supply disruptions from the Middle East, one of the largest oil producing regions on the globe, alongside increased optimism regarding US-China trade relations, adding further upward momentum to prices by heightening expectations of stronger demand.

In the carbon markets, the EU ETS recorded a 2.6% gain from May, averaging €73.15/t, while the UK ETS fell 0.2% to average £51.25/t.

Concerns around French nuclear reliability and signals from the EU on potential CBAM expansion have bullish impacts on future market sentiment, while EU carbon prices were further supported by significantly above-average temperatures across the continent, which lead to increased demand for carbon-intensive cooling appliances.