Jun26 Energy Market Brief

May 2026 brought some of the most significant price movements the UK energy market has seen since the acute phase of the 2022 crisis, driven almost entirely by the fallout from the Strait of Hormuz disruption that began in late February. While the month ended with prices pulling back from their peaks, the overall picture is one of a market carrying a meaningfully elevated risk premium heading into summer.

Gas set the tone throughout. Day-ahead NBP hit 130.10 pence per therm on 19 May, its highest level since late March, before falling back to around 117 pence by month end as diplomatic signals suggested progress toward a ceasefire affecting Hormuz shipping. That intramonth swing of more than 13 pence says something significant about how reactive the market currently is to any news from the Middle East. The underlying direction has been firmly upward since the start of the year.

Around 20% of global oil supplies and a substantial share of LNG volumes pass through the Strait of Hormuz. While some easing has occurred, the shipping disruption has not fully normalised, and Qatari LNG output has also been reduced by infrastructure damage sustained earlier in the year. The practical effect for the UK is a gas supply picture that is both more expensive and less predictable than it was six months ago.

Norwegian pipeline maintenance contributed a further layer of pressure through parts of May. Norway is the UK’s single largest source of pipeline gas, and scheduled work at several facilities added to the tightness in near-term supply. As that maintenance programme unwinds through June, some natural improvement in pipeline flows should follow, though how much of that is offset by wider market factors remains to be seen.

European storage continues to be a central concern heading into summer. The injection season began from a weakened starting position at around 34% of EU capacity on 1 April, materially below recent seasonal norms. Progress through April and May brought that figure to approximately 36%. Reaching the EU target of 80% by 1 November will require a sustained injection pace with limited further disruption. The winter risk premium embedded in forward contracts reflects exactly that uncertainty.

Power prices tracked gas through the month, with day-ahead electricity averaging around £106 per megawatt hour during the periods of peak stress. Solar generation provided some offset, particularly through the warmer spring conditions, and on high-output days power prices softened noticeably. This is beginning to show up with greater regularity as installed capacity grows. The structure, however, has not changed. When solar drops, prices revert quickly to gas-led levels.

Crude oil pulled back from its mid-March peak of $126 per barrel to average around $95 per barrel through latter May. OPEC+ announced a modest production increase for June, though analysts were quick to note that additional Gulf barrels remain difficult to move to market while Hormuz restrictions persist. The broader trajectory points toward further easing in the second half of the year if the diplomatic situation continues to improve, but that is far from guaranteed.

Ofgem’s announcement on 27 May that the household price cap will rise 13% to £1,862 from 1 July confirms what businesses have been experiencing in commercial renewals. The market is significantly more expensive than it was twelve months ago, and there is no obvious near-term catalyst to bring it back to those levels.

For customers, the end-of-month easing should not be mistaken for a trend. Gas, storage, LNG supply and geopolitical uncertainty remain the driving forces, and their influence is likely to grow as we approach winter. Opportunities to secure value will continue to appear in windows rather than sustained downward moves. Having a clear procurement strategy in place, rather than waiting for calmer conditions that may not arrive, is the sensible position right now.