MARKET COMMENTARY
April 2026
The ongoing conflict between Iran and the United States continues to shape international energy markets. What began as a geopolitical confrontation has meanwhile escalated into a regional conflict with direct implications for energy infrastructure in Iran and the Gulf states. Its effects are now being felt well beyond the region: substantial price increases can be observed across nearly all conventional energy commodities. As a result, the risk of renewed inflationary pressure is growing — from higher fuel prices and rising procurement costs to broader burdens on industry and the overall economy. Experts are already referring to a fossil energy crisis and an oil and gas price shock of historic proportions.
After one month of military escalation, the overall situation remains unresolved. What is clearly visible, however, are the developments on commodity and forward markets: the TTF front-month gas price rose from EUR 32/MWh in early March to EUR 54/MWh in early April. Over the same period, the German power price for calendar year 2027 increased from EUR 81/MWh to EUR 94/MWh. Front-year coal prices rose from EUR 98/t to EUR 133/t, while prompt oil prices climbed from USD 70 to USD 112 per barrel. Following the sharp surge at the beginning of the month, momentum has eased somewhat, but volatility remains elevated. At one point, the TTF front-month contract fell by 9% within a single week, while daily price swings of 5% to 6% have become more the rule than the exception. At the same time, the oil market is witnessing one of the steepest price increases in recent history. For European consumers, this means not only heightened media attention, but also tangible cost increases. Reassuring statements from the United States suggesting that the global oil market remains adequately supplied have so far failed to calm markets.
Particularly severe are the implications for international energy trade. Roughly one fifth of global oil and gas trade is affected by the disruption of shipping through the Strait of Hormuz. Whereas the strait had previously seen between 80 and 120 vessels pass through each day — around half of them tankers — current traffic has been reduced to only a small number of ships. Passage is effectively limited to selected countries, including Pakistan, India, Malaysia, Thailand and China. In March alone, an estimated 95 TWh of LNG exports were lost as a result. QatarEnergy has declared force majeure vis-à-vis the Italian utility Edison and cancelled ten LNG cargoes through mid-June. Replacement deliveries appear possible in principle, but only at significantly higher prices. Europe has not yet experienced acute supply shortages, but the situation is deteriorating and EU energy ministers are currently coordinating crisis response measures.
At the same time, geopolitical escalation continues. On the last weekend of March, Houthi units from Yemen launched attacks on Israel for the first time, extending the conflict toward Bab el-Mandeb, another strategic chokepoint in global trade located in the southwestern part of the Arabian Peninsula. As a result, not only energy markets but also industrial commodity markets are coming under increasing pressure. The world’s largest single-site aluminium plant has been shut down; overall, around 10% of global aluminium supply originates from the Gulf states.
Saudi Arabia is attempting to offset part of the disruption. Exports are being rerouted via the East-West Pipeline to the Red Sea port of Yanbu, most recently at a volume of around 4.6 million barrels per day. While substantial, this volume replaces only part of the quantities that had previously passed through the Strait of Hormuz each day. Should Saudi infrastructure on the Red Sea also become a target of attack, this alternative route would likewise be at risk. JP Morgan has already outlined a possible next scenario: in such a case, Saudi oil would need to be rerouted via the SUMED pipeline through Egypt to the Mediterranean, implying longer transport routes and correspondingly higher costs.
The real-economy consequences now extend well beyond energy markets. South Korea, which covers around 70% of its oil demand from the Middle East, is reportedly considering nationwide driving restrictions for private vehicles for the first time since the 1991 Gulf War. Sri Lanka has raised electricity tariffs by more than 7% and is struggling to secure sufficient crude oil supplies for its only refinery. Globally, the risk of shortages in physical goods such as fertilisers and grain is also rising. In Europe, the impact is currently felt most directly by industry, where rising production costs are likely to become increasingly inflationary. This is the core economic risk — comparable to the gas shortage of 2022. If tight supply conditions persist, energy market pricing could become entrenched at levels at which industrial consumers are no longer able to operate economically, because short-term variable costs exceed achievable product prices. At a gas price of EUR 54/MWh, some sectors are already moving back into critical territory — despite prices still being significantly below the peaks seen in 2022. German economic research institutes have already revised their 2026 growth forecasts downward.
At the European level, a range of political and regulatory options is currently under discussion: price caps, the clawback of windfall profits from energy producers, an accelerated build-out of renewable energy infrastructure, stronger coordination among member states, and demand-reduction measures extending to transport policy interventions. Lithuania, for example, has halved rail ticket prices in an effort to shift mobility from road to rail. On 31 March 2026, the European Commission prepared member states for a prolonged period of elevated fuel prices. At the same time, measures to refill gas storage facilities and safeguard oil supply are being coordinated. The Commission is also calling on consumers to reduce energy consumption, particularly in the transport sector.
How the situation will evolve remains difficult to assess, as geopolitical dynamics are currently overshadowing traditional market fundamentals. The widely anticipated LNG supply surplus expected from rising global liquefaction capacity from this summer is unlikely to materialise for the time being. Additional escalation risks stem from the possibility of broader US military involvement. Even in the event of a near-term political de-escalation, it would likely take three to four months for the remaining Qatari facilities — representing around 83% of total capacity — to return to full utilisation. The restoration of destroyed infrastructure is likely to take considerably longer. Until then, the market will remain short of a significant volume of LNG supply. Against this backdrop, EU Energy Commissioner Dan Jørgensen has warned that even a rapid peace agreement would not result in a near-term return to previous market normality.
Political signals from the United States have so far failed to calm markets. At the same time, as of 1 April, signs of diplomatic initiatives are increasing following indications of a possible US withdrawal and intensified mediation efforts by China and Pakistan. In this environment, careful assessment of price and procurement risks remains highly important. From today’s perspective, we continue to see more upside than downside potential in the short term. At the same time, a measured and balanced approach remains essential.
Finally, we would like to reiterate that our aim remains to provide the most objective possible analysis of market developments. This does not diminish the human tragedy of armed conflict and the suffering it causes; rather, these dimensions lie deliberately outside the immediate scope of this market commentary. All the more, we hope for rapid de-escalation and a peaceful resolution of the situation.
Matthias Kisslinger
for the Inercomp Team