Spring 2026 Energy Market Update: Key Risks and What to Watch

As we move through spring, energy markets continue to be shaped by a range of factors, particularly the recent geopolitical developments which have been heavily influencing energy markets, along with supply dynamics and the seasonal pressures influencing demand and pricing.

In this update, we’ve highlighted what’s been happening in the energy markets over the past few months, what’s been driving prices, and what we’re watching closely as the season progresses.

Watch the full video below or scroll down for the key takeaways.

What’s happening to energy prices?

Over the past few weeks, energy markets have been heavily influenced by geopolitical developments, particularly the ongoing conflict in the Middle East.

This has pushed prices up to some of the highest levels we’ve seen since the 2022 energy crisis, with significant volatility along the way. At one stage, intraday movements reached as much as 55%, highlighting just how reactive the market can be in the current environment.

Since then, prices have started to moderate slightly as more clarity has emerged around the situation. However, the market remains unpredictable, and sentiment can shift quickly.

One of the key features we’re seeing right now is strong backwardation in the curve. In simple terms, this means that near-term contracts are priced much higher than those further out.

We’ve also seen a significant shift in market positioning in the European gas market. Investment funds have moved from short positions at the start of the year to building near-record long positions in a matter of weeks, which is adding further volatility into the market.

LNG

A major driver behind recent price increases has been disruption in the Strait of Hormuz.

This is a critical shipping route for global energy supply, and recent conflict has reduced traffic through the strait by around 98%, with more than 200 oil and gas vessels currently anchored near the strait.

Given that around 20% of global LNG flows through this route, the impact on supply has been significant. Current estimates suggest a potential reduction of more than 28 bcm of LNG supply across the summer period. However, overall global supply is still set to increase by 2.9%.

At the same time, we’re seeing strong competition from Asia. Around 80% of Qatar’s LNG exports are typically directed there, and despite some price sensitivity, near-term demand remains strong.

As a result, cargoes are increasingly being pulled away from Europe towards Asia, where prices are higher. That added competition is continuing to support prices across European markets.

Storage

As we move into the summer period, the focus now shifts to gas storage refilling across Europe.

Currently, storage levels in northwest Europe are sitting at around 18%, which is below the five-year average, although still above some of the historic lows of 2018.

With reduced Russian pipeline flows, Europe is now far more reliant on LNG to refill storage, which brings additional risk depending on how supply dynamics evolve.

If flows through the Strait of Hormuz begin to recover towards late April, we could see storage levels reach around 87% by November, which would be broadly in line with seasonal expectations.

However, if disruption continues throughout the summer, refill rates are likely to remain slower, with storage potentially only reaching around 65%. That would leave the market much tighter heading into winter.

If this is then combined with a colder winter, we could see stocks significantly depleted by the following summer.

Demand

On the demand side, the EU continues to push towards its target of reducing gas demand by 15%.

At the moment, the six-month rolling average for northwest Europe is sitting closer to 18%, which shows that demand reduction is still playing a role in balancing the market.

If prices remain elevated, we may see further demand destruction, although much will depend on how prices evolve from here.

Supply – Norway and UKCS

On a more positive note, Norwegian gas exports are expected to increase slightly this summer, reaching around 55 bcm compared to 53.7 bcm last year. This is largely due to a lighter maintenance schedule.

However, UK Continental Shelf production is forecast to decline by around 9.6% year on year due to ageing assets, with similar declines expected in the Netherlands.

So while there are some positives, overall domestic supply continues to trend downwards.

Carbon

Carbon markets have also seen some movement. Carbon prices reached almost three-year highs earlier in the year but have since fallen back, with EU carbon down around 31% and UK carbon down roughly 51%.

This has largely been driven by weaker industrial activity and uncertainty around policy.

More recently, we’ve seen some support return following the Carbon Summit in March, where there were renewed commitments to strengthening the EU Emissions Trading Scheme.

This includes potential reforms to the Market Stability Reserve and the potential introduction of a €30 billion decarbonisation fund, both of which could provide longer-term support to carbon pricing.

What this means for your energy strategy

At the moment, we’re seeing the most significant price increases in near-term contracts, particularly through to early 2027, with some impact now feeding into longer-dated positions as well.

Given current conditions, this isn’t an ideal time to enter the market for near-term contracts unless you need that budget certainty.

However, the backwardated curve does create an opportunity to look further

ahead. Securing positions on longer-dated contracts could help protect against potential upside risk if disruption continues.

For customers with fixed contracts starting in October 2026, it’s worth engaging with the market early and issuing tenders soon. That gives you flexibility to act quickly if conditions improve.

Ultimately, any decision should come down to your appetite for risk and the level of certainty your business needs in the current environment.

Need support? We’re here to help

While prices have eased slightly, the combination of geopolitical risk, LNG disruption and storage uncertainty means volatility can return quickly.

If you’re unsure what this means for your business, or want to sense-check your current strategy, we’re always happy to help.

You can also head to the Insights section on our website for more updates and practical guidance.