The first days of August have seen a sell-off in UK gas and power markets in response to apparent progress back towards a form of peace deal in the Middle East. The front month gas contract – which is now September deliveries – saw two-week low price on 4th August, briefly trading down at 132p/th as US and Qatari sources suggested the Strait of Hormuz could be reopened as early as this week. Brent crude, which surged to $100/bbl in late July amid a return to strikes, briefly traded below $80. UK power prices, though remaining higher than they were even during the mid-March surge that followed the strikes on Ras Laffan LNG production facility in Qatar, have also seen sharp declines. The Winter 26 period fell by £9/MWh on 4th August alone, dropping from £124/MWh to £115/MWh.
In an interview with CNBC, US Treasury Secretary Scott Bessent said that the US could secure a deal with Iran to open the Strait of Hormuz as early as “today or tomorrow.” Bessent also referred to the number of vessels currently trapped in the Persian Gulf; “once the strait reopens, there are hundreds if not a thousand ships sitting in there waiting to go out… it’s not just energy, it’s fertilizer, it’s refined products, it’s various industrial gasses, so I think that we could see a big relief trade as those prices go down.” US Secretary of State Marco Rubio said that Washington and Tehran have yet to finalise talks on passage through the Strait, but that he hopes an agreement will come “very shortly.” Rubio told reporters at the State Department that “there’s been progress made in those talks, but not finality yet.”
Traffic via the Strait of Hormuz has improved but remains well down on pre-war levels. The 3rd August saw 10 inbound and 12 outbound crossings, according to ship tracking data. There were no LNG tankers among the crossings, with the Al Areesh still the only confirmed LNG transit since the strikes on the Al Rekayyat nearly a month ago. As a result of the conflict, during the month of July 26 LNG exports from the Middle East were down over 70% against the same month in 2025. Europe’s LNG imports for July fell to their lowest level since the same month in 2024, a period after which Europe’s gas storage started the summer injection window at 31% higher fullness than was the case at the start of 2026. European gas storage has ticked up to 57.66% fullness over the last week, but has now set an unwelcome record for lowest fullness relative to time of year on record, surpassing the previous low set in 2021.
Sustained high temperatures across Europe have left river levels low in a number of the continent’s major rivers, reducing electricity output and increasing demand for gas-for-power. Nuclear and hydro power generation has been impacted across France, Hungary, Romania, Germany, Serbia and Norway, with Hungary’s Paks nuclear power plant shut down due to insufficient cooling water availability. Serbia’s largest coal-fired power plants have needed to cut output due to lack of water, with Romania’s declaring a nationwide state of emergency throughout August stemming from a decline in power production.
Having built the largest net long position on the Dutch TTF in 8 weeks, hedge funds trimmed some longs last week, bringing their overall net long position to 244TWh. Funds are still positioned to benefit from expected future price increases.
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