Hello, and welcome to this week’s market update from Smarta Energy.
This Monday, the energy market is responding to a difficult weekend in the Middle East. A drone attack forced Saudi Arabia to close its East-West oil pipeline, whilst a planned meeting between Iran and Gulf states about safer shipping through the Strait of Hormuz was postponed.
The pipeline in question does not carry gas, but it was a main alternative to the Strait. The attack shows the conflict is spreading to infrastructure previously considered to be safe. Shipping through Hormuz has also remained unusually low over the weekend.
This matters to the price of gas because the Strait is a critical route for LNG, natural gas in its liquid form, leaving Qatar and the United Arab Emirates. The UK remains comfortably supplied today, but greater uncertainty over future deliveries is keeping gas and power prices for this coming winter, and the seasons beyond, elevated.
Okay, let’s discuss gas in a bit more detail now. Prices for this coming winter rose sharply again last week. The market is now placing more weight on the possibility that the conflict lasts longer and disrupts energy routes beyond Hormuz.
ponement of today’s regional meeting is important because it removes one of the clearest opportunities for near-term progress. Iran and Oman had been working on proposals to manage shipping through the Strait. With those discussions delayed, the market has less reason to expect normal traffic to resume any time soon.
The UK is entering the period when LNG arrivals would normally increase ahead of winter. One cargo is arriving in Wales today from Texas, but no further deliveries are scheduled. That does not create an immediate shortage, although it leaves the UK more exposed if the weather turns much colder or another route is disrupted.
European storage also remains lower than usual at around two-thirds full. Storage is the gas saved during quieter months and used when winter demand rises. The current level is enough to avoid an immediate supply concern, but Europe still needs further injections before winter really gets started. Competition for available LNG cargoes is therefore likely to remain strong.
The domestic picture is more reassuring. The UK system has opened comfortably supplied and has been able to move from taking gas out of storage to putting a modest amount back in. Temperatures have also been revised higher from next week, which should reduce heating demand as we move towards autumn.
Bringing those factors together, the immediate UK market may receive some protection from mild weather and comfortable supply but this is more likely to limit upside, then to start bringing prices down. Our outlook for this coming winter remains bullish because shipping risks are increasing, European storage remains relatively low and the next wave of LNG deliveries has yet to appear. A credible return to regional talks would be the clearest reason for some of that pressure to unwind, but at the time I am recording this, there is has been no additional updates.
Right, moving from gas to power then. First off, the link between the two markets remains crucial. Gas-fired generators often provide the final electricity needed to meet demand, so higher gas costs usually feed through into higher UK power prices. This is why contracts for this coming winter have continued to rise even though the immediate power outlook is softer.
Wind generation should be above normal for most of this week. More wind means fewer gas-fired generators are needed, which could reduce the cost of electricity for immediate delivery. This provides useful short-term relief, but it does not fully offset the higher cost of gas across the winter months.
Further ahead, electric vehicle demand is moving in the opposite direction. A recent industry study found that UK consumers are more willing to consider an electric vehicle than they were a year ago. Value for money has also overtaken sustainability as the main attraction. If that translates into stronger sales, electricity demand will gradually increase, particularly around evening charging periods.
There is also an encouraging development for offshore wind. Research led by DNV found that standardised turbine designs and a steadier pipeline of projects could cut costs substantially. Greater consistency could make manufacturing and installation quicker and cheaper.
However, cheaper turbines only help if the network can carry their electricity. A new National Audit Office report warned that many of the grid upgrades needed by the end of the decade are still at an early stage. Delays can force wind farms to reduce output in one area whilst gas-fired stations are used elsewhere, adding costs that ultimately feed into bills.
Overall, the power picture is divided. Strong wind should keep the short-term market under downward pressure, but higher gas prices and rising network costs continue to support this coming winter. Longer term, electric vehicles should add demand, whilst cheaper offshore wind could provide more supply if the grid is upgraded quickly enough.
Before turning to what this means for businesses, a quick look at the weather. Temperatures should remain close to normal this week and then move higher from next week. That should keep heating demand contained and provide some protection against the wider rise in gas prices.
Wind is expected to dip tomorrow before rising comfortably above normal for much of the rest of the week. This should lower the need for gas-fired generation, although the day-to-day changes may still create some movement in short-term power prices.
So, what does this mean for UK businesses? The key point is that the market for immediate delivery and the market for this coming winter are being pulled in different directions. Mild weather and strong wind are helpful today, but they do little to remove the risk of disruption later in the year.
Businesses with winter exposure should understand how much remains unsecured and agree in advance what would trigger action. Buying everything after a sharp rise may prove expensive, but waiting without a clear limit could leave budgets exposed if shipping conditions deteriorate further. A structured approach allows some opportunity for prices to fall whilst preventing one geopolitical event from determining the full outcome.
It is also worth looking beyond one contract period. Prices further into the future remain below this coming winter, so comparing different contract lengths may reveal better value. Businesses should also consider the full delivered cost, because delayed grid investment can add to bills even when wholesale prices fall.
To summarise, comfortable UK supply conditions are keeping day-ahead gas and power prices below the front month and this coming winter. However, they are far higher than we would expect under normal market conditions, whilst growing risks around energy infrastructure and LNG shipping continue to support the wider market.
This week, my team and I will be watching the condition of Saudi Arabia’s pipeline, traffic through the Strait of Hormuz, any attempt to restart regional talks, UK LNG arrivals and the changing wind forecast. Those developments will determine whether the recent rise continues or begins to unwind.
Thank you for listening. If you would like to discuss what these developments mean for your energy position or procurement strategy, please get in touch with us at Smarta.
Disclaimer:
This market update is provided for general information only and reflects market conditions at the time of recording/publication. It should not be treated as financial, legal or procurement advice, or as a recommendation to buy, sell, fix, or trade energy at any particular time. Energy markets can change quickly, and businesses should seek advice based on their own circumstances before making procurement decisions.
Copyright © 2026 Energy Live News LtdELN