February Catch-Up

February was, in many ways, representative of broader energy market trends seen over the past 12 months. Prices remained relatively flat as we began to emerge from the colder winter period, particularly towards the end of the month when temperatures rose above 10°C.

Fundamentals were generally strong. Consistent wind conditions throughout the month meant wind generation outperformed gas by around 7% in total generation. Imports, alongside nuclear and biomass output, also remained steady.

A mid-month rise in temperatures signalled the start of gas storage injections, which continued into March. Towards the end of February, there were early signs of geopolitical tension resurfacing, with renewed unease between the US, Israel and Iran regarding Iran’s nuclear programme.

March

In contrast to a relatively calm February, March proved far more volatile.

Early in the month, escalating tensions in the Middle East significantly impacted global energy markets. US and Israeli strikes on Iran, which reportedly resulted in the death of Ayatollah Khamenei and targeted key military infrastructure, triggered a sharp escalation. Iran responded with retaliatory strikes against Israeli assets and US interests in many neighbouring nations.

While geopolitical sentiment alone would have unsettled markets, the key fundamental driver was the Strait of Hormuz, which was effectively closed by Iran. The Strait is a critical passageway for gulf oil and gas exports to the wider global market, with Iran controlling the northern border (while Oman and the UAE share the southern side). Unlike the more surgical US strikes on Iranian nuclear facilities seen last summer, this did not prove to be a short-lived event. Continued attacks by both sides, continued with the ongoing chokehold over the Strait of Hormuz, kept prices elevated.

Conflicting narratives also emerged. US President Trump indicated that negotiations were underway and that a resolution was close, while Iranian officials denied any engagement and maintained that any end to the conflict would be on their own terms. Pakistan, a US ally sharing a border with Iran, appeared to support the US position by acting as a mediator. Although this briefly eased market concerns, renewed strikes including the death of a senior Iranian naval commander linked to the Strait, quickly reignited volatility.

At the time of writing (27th March), the situation remains highly fluid.

From a fundamental’s perspective, wind generation fluctuated but still outperformed gas by approximately 9% over the month. Temperatures were mixed, with occasional peaks of 18°C but generally hovering around 10°C.

Gas storage levels increased steadily, already surpassing the same period last year, when levels remained relatively flat. Looking ahead, it will be important to monitor whether storage injections accelerate further, particularly as Middle Eastern tensions tighten global LNG supply.

Domestically, the UK Government is also facing growing pressure regarding the lack of new North Sea oil and gas extractions developments with a growing opinion that both striving towards a low carbon future and utilising existing assets are not mutually exclusive.