Hello, and welcome to this market update from Smarta Energy.
The main story this Monday is renewed tension in the Strait of Hormuz. Over the weekend, the United States struck three Iranian tankers and Iran responded. Iran has also announced plans for a restricted zone and shipping corridor through the Strait.
This matters because the Strait is a critical route for liquefied natural gas, or LNG, leaving Qatar and the United Arab Emirates. LNG is natural gas cooled so it can be transported by ship. Traffic is now at its lowest level since May, making deliveries less predictable.
UK gas and power prices have risen as a result. The UK remains well supplied today, but the risk of a longer disruption is keeping prices for this coming winter elevated. That contrast is the central theme of this week’s update.
Let’s start with gas. Prices for this coming winter rose by around 6% last week, with later winters also moving higher. The market is charging more for protection against disruption over the months ahead.
European gas storage is one reason for that caution. Stocks are below 67% full, their lowest level at this point in the year for more than a decade. Storage is Europe’s winter safety net, built up during quieter months and used when demand rises or supply is interrupted. Europe is not facing an immediate shortage, but it has less room for further problems.
Europe has more LNG import facilities and a wider range of suppliers than it did during the energy crisis. Even so, a cold winter or prolonged disruption in the Gulf would increase pressure on stored gas.
Qatar has warned that some contracted deliveries to Europe may not arrive as planned. This shows that the disruption is affecting physical supply, not just market confidence. Qatar is one of the world’s largest LNG suppliers and its cargoes normally travel through the Strait.
There are some helpful factors for the UK. Maintenance on the pipeline between the UK and Belgium is limiting exports until later this month, allowing more gas to remain here. American LNG supply has also recovered after last week’s storm disruption.
A longer-term concern is Rough, the UK’s largest gas storage site. It represents around half of our storage capacity and can hold enough gas to heat approximately 2.4 million homes over winter. Centrica has warned that the facility could close next year without a workable support agreement. Losing that capacity would make the UK more dependent on imported gas during cold and low-wind periods.
Bringing the gas picture together, prices for immediate delivery may remain fairly steady because the UK is well supplied. This coming winter is more exposed. Low European storage and uncertainty around Qatari LNG should keep prices supported unless shipping conditions improve or diplomacy progresses. If tensions ease, some of the recent increase could unwind quickly.
That brings us naturally to power. Gas-fired stations still help set UK electricity prices, so when gas becomes more expensive, power often follows. Prices for this coming winter therefore rose by a similar amount last week.
The short-term picture is more comfortable. Wind generation is expected to increase tomorrow, reducing the need to run more expensive gas-fired stations. That relief may be brief, with wind returning closer to normal levels later in the week, but it should help contain prices for immediate delivery.
Demand across much of Europe is also expected to remain below normal. This means less competition for electricity and matters because the UK regularly trades power with neighbouring countries.
France is particularly important. Its nuclear maintenance programme is easing, making more electricity available for export and helping to stabilise prices across north-west Europe.
Infrastructure risk is the less comfortable part of the power story. German authorities are investigating suspected attacks on substations and power lines, alongside a fire at a transformer site in Berlin this morning. Supply has not been materially affected and the cause of the latest fire is unclear, but the incidents highlight the vulnerability of Europe’s electricity network.
The UK also faces a longer-term challenge. Planned network upgrades may not be sufficient to connect Scotland’s future offshore wind farms. Building turbines is only useful if the electricity can reach consumers. Without those upgrades, projects may be delayed and reliance on gas-fired power could remain higher.
Overall, the power outlook remains upward-leaning because of higher gas prices and wider security concerns. Better French nuclear availability, lower European demand and stronger wind should provide some relief, but a meaningful fall is more likely if tensions in the Middle East begin to ease. This leaves short-term prices softer than the outlook for winter.
Before turning to what this means for businesses, a quick look at the weather. Temperatures should fall over the next few days before recovering. Heating demand may rise slightly, but conditions remain fairly mild.
Wind output should rise sharply tomorrow and then fall later in the week. This explains why short-term power prices can move quickly: substantial low-cost generation can enter or leave the system within days.
So, what does all of this mean for UK businesses? The main point is that good supply within the UK today does not remove the risks facing this coming winter. European storage, global LNG deliveries and events in the Gulf can all affect the price paid by UK consumers.
Businesses with exposure over the next few months should understand how much energy remains unsecured and agree in advance what would trigger action. Buying everything immediately after a sharp rise may prove expensive. Equally, waiting without a clear limit could leave budgets exposed if shipping conditions deteriorate further. The aim is controlled flexibility, rather than trying to predict every market move.
Longer-dated prices remain well below the cost of this coming winter. Businesses considering a fixed contract should therefore compare different contract lengths rather than looking at one headline price. Flexible buyers may also be able to secure selected longer-term value whilst keeping some opportunity if prices fall nearer delivery.
Finally, procurement decisions should look beyond today’s wholesale price. The future of Rough, delays to renewable connections and the cost of protecting infrastructure could all influence bills and price volatility over the life of a contract.
To summarise, the UK gas and power systems remain comfortable in the short term, but this coming winter is carrying a higher price because the risks around European storage and LNG shipping have increased.
This week, we will be watching traffic through the Strait of Hormuz, any signs of diplomatic progress, European storage and changes in UK wind generation. Those factors 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 contact the Trading and Risk team at Smarta Energy.
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