Energy market update: Iran-Gulf conflict driving gas & power price volatility

While our primary concern is with those affected by the ongoing situation in Iran and the Gulf Arab states, we appreciate that there will be a lot of uncertainty and nervousness when it comes to energy prices for many organisations.

Here we are summarising the current impacts on the energy markets and the short-term points to consider if you have contracts renewing this year.

What is happening?

You will likely have seen that missile strikes were launched on Iran by the US and Israel, with retaliation following, and a number of targets having been hit across the region. As a result, both near- and long-term gas and power prices have risen significantly, and market liquidity has declined substantially as a result.

What is causing the increase in energy prices?

Europe remains heavily dependent on Liquefied Natural Gas (LNG) imports, with Qatar accounting for 20% of global supply and therefore playing a key role as one of the world’s leading producers.

This has been impacted by the conflict, with Qatar’s state-owned energy company, QatarEnergy, temporarily halting production at some of its facilities and suggestions it could take up to a month before QuatarEnergy are able to start bringing LNG back on line.

Qatar’s LNG exports pass through the Strait of Hormuz, which has also been directly affected by the situation, and as a result, flows from the region are currently constrained along this key shipping route.

Gas markets across the world are interlinked, so any disruption – or risk of disruption – to LNG supply, directly impacts European gas and power pricing and has resulted in a price increase. As a substantial proportion of the UK’s electricity is generated from gas (26.8% in 2025), this price increase means that electricity wholesale prices have also increased. This is due to the way the UK market is set up which means that gas prices are directly associated and help determine the price of electricity.

Initial price movements have already been significant, and we anticipate continued price volatility and uncertainty whilst the situation unfolds.

It remains unclear whether this conflict will be short-term or develop into something more prolonged. However, it is clear that, for now:

• Prices are likely to remain high and volatile which means suppliers will be unable to hold prices for as long as they typically do.
• Liquidity will most likely be reduced, impacting suppliers’ ability to offer and provide prices.
• Additional credit risk for suppliers means that supplementary requirements may be needed for assurance purposes.

What does this mean for you?

If you are an existing Zenergi client and have a contract renewing in 2026 then your procurement manager will continue to monitor the situation and will provide advice based on market conditions at the appropriate times.

During this period of uncertainty there may be times where pricing may be more difficult to obtain from suppliers and they may be unable to hold these for extended periods, which could mean we need to refresh any prices provided within the day. Your procurement manager will of course manage this process as normal, but it is worth noting as this may lead to an increased level of interaction on the day prices are provided.

As always, we appreciate your patience and understanding. If you have any questions, please reach out to us for further information. You can also keep updated with the latest developments in the energy markets by checking out our Market Watch daily bulletin.