May in review

Rising temperatures increased electricity demand as the UK recorded its hottest May days on record. Gas and Liquid Natural Gas (LNG) storage levels remained below those of the previous year. Concerns over supply security and potential price pressures ahead of Winter 2026 heightened as geopolitical tensions between US-Israel, Iran and Lebanon continued to drive the rise in gas prices.

The market also faced reduced Norwegian gas supply during the summer maintenance period, although some maintenance was scaled back to help ease price pressures. Meanwhile, the ongoing conflict and stalled nuclear negotiations and restrictions on ports and limited shipping through the Strait of Hormuz, added further uncertainty to global energy markets despite international diplomatic efforts.

June

A late-June heatwave placed significant strain on the UK electricity system, leading to tight supply margins and increased reliance on emergency imports from Europe. Surging power demand and constrained domestic capacity caused the National Energy System Operator (NESO) to look to cross-border interconnectors to prevent supply issues. At the peak of demand cross-border power was sourced at prices of up to £1,400/MWh - around 17 times normal levels - and required special approval from EU grid operators to facilitate the emergency imports.  

In terms of energy storage, as with June, levels have remained steady but lower than the previous year. A significant development in this area was Ofgem's announcement on June 26, shortlisting 16 major Long Duration Energy Storage (LDES) projects. These projects represent a combined capacity of 7,645 MW (7.6 GW) and are the first to be backed under the UK's innovative "cap-and-floor" support scheme. This regulatory push aims to resolve severe grid congestion, decrease reliance on international gas markets, and support the UK's target for a clean power grid by storing renewable energy when wind and solar generation are high. However, the lead time involved in setting up these storage solutions means it will be some time until the benefits are felt, and the LDES projects are also currently only in the consultancy stage.

A ceasefire agreement reached between the US and Iran drove marked decreases to long-term gas and electricity pricing mid-month. Average decreases of 10% helped to relieve the steady price increases which have been building since early April and sustained themselves through May. Prices have since this time retained some of their previous volatility but remain at a comparatively reduced level. 

Looking ahead to July

The conflict in the Middle East surrounding the Straight of Hormuz is likely to remain the largest influencer on UK markets as we look ahead to July. While there have been multiple developments in reaching ceasefires and framework agreements for ending the conflict, the trends of these agreements being ignored or overstepped by participants has continued throughout. It wouldn’t be amiss to expect this to continue into July.

The Norwegian gas pipeline maintenance, which has been a steady theme across the last three months, remains ongoing, through the largest pieces of work are now complete.

As we enter July, we anticipate a period of ‘stable instability’ as some of the largest ongoing influences on prices have begun to recede, however the markets remain poised and ready to react to further heatwaves and geopolitical developments.