Market outlook
Almost all commodities had started the year on a calm note, and even the low temperatures and tight gas storage levels in Germany had little impact on prices. But with the war, the attacks on energy infrastructure in Iran, and the blockade of the Strait of Hormuz, the tide turned.
March 2026
At the start of 2026, prices for nearly all commodities remained neutral to slightly bearish. Even the low natural gas storage levels during the cold spell failed to support the market, as rising LNG capacities left no room for nervousness. In addition, subdued sentiment in the German economy meant that no significant increase in gas and electricity consumption was expected on the demand side. As a result, prices for emission allowances (European Union Allowances, EUA) also weakened, losing approximately 18 EUR/ton in value by the end of February. The 2027 electricity base contract traded between 76 and 84 EUR/MWh in February.
Price Spikes Following the Outbreak of War
However, the outbreak of military conflict between Israel, the U.S., and Iran on February 28 marked a turning point in the energy markets. The reaction was particularly pronounced in electricity and gas forwards, as the geopolitical risk premium was immediately reflected in these products. Prices reacted very bullish at the outset, indicating a reassessment of supply security in Europe. Rightly so, as the start of military hostilities led to a significant disruption of LNG flows from the Persian Gulf. In the gas market, spot and monthly products reacted particularly strongly, while annual products rose less sharply. This difference suggests that the market anticipates supply stress in the short term but continues to rely on LNG capacity expansion and political countermeasures in the medium to long term. The 2027 electricity base contract is currently trading at 92 EUR/MWh (as of March 18).
Oil price above $100 per barrel
The war’s greatest impact was on the oil price. The day after the war began, the oil market reacted abruptly: Brent crude jumped from around $70–75 per barrel to well over $100 per barrel within a few trading days, reaching $115–120 per barrel at times. This represented an increase of nearly 50 percent. The main drivers were the de facto blockade of the Strait of Hormuz, attacks on energy infrastructure in the Gulf region, and massive uncertainty regarding physical supply disruptions. About 20 percent of global oil trade passes through the Strait of Hormuz. Although there were slight corrections following the initial price spikes and strategic oil reserves were released, the market remained highly volatile.
Outlook
The first quarter of 2026 underscores the increased geopolitical sensitivity of European energy markets. While price movements remained relatively stable through the end of February, the escalation in the Middle East led to an abrupt repricing, particularly for natural gas and electricity products. Currently, the energy sector has pulled back from its highs but remains at a significantly higher level than before the military conflict.
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