MARKET COMMENTARY

Before the attack on Iran, the supply outlook for natural gas in Europe was clear: additional supply from the United States and Qatar was expected to increase, and prices for Cal 2027 at the TTF had fallen below EUR 25/MWh. On March 4, Cal 2027 is trading again at EUR 34/MWh, while Cal 2028 remains only slightly affected at just under EUR 26/MWh.

These positive expectations of a gas surplus have been clouded for the coming periods due to the war developments in the Middle East. Over the weekend around the turn of the month from February to March 2026, a risk materialized that has hung over the global energy supply like a sword of Damocles for decades. The Strait of Hormuz, the bottleneck of oil and LNG transport, is effectively closed following the attack on Iran and the corresponding counter-reactions. Gas markets in Europe are reacting very strongly, with the short end up by around 50 percent (as of 04 March 2026, 14:45). Whether this move represents an overreaction or merely the beginning of a longer upward spiral depends on the dynamics of escalation. The situation will need to be reassessed on a daily basis; any answer at this point is inevitably unsatisfactory. The decisive factor is the duration of the closure, as this will determine the impact on all energy markets.

The power market in EU Europe has also risen from the yearly low of the Cal-2027 contract of around EUR 77/MWh to EUR 87/MWh. Even for the short term, a price trend cannot currently be derived with any degree of seriousness from an energy market perspective. Whether prices fall again will be negotiated in political backrooms. The entire energy complex is moving upward. A fuel switch to cheaper alternatives is also not possible, as oil and coal prices are rising as well. Electricity, as a derivative of all these fuels, is automatically pulled along. This crisis is therefore unique because it is global and affects both gas and oil simultaneously. We have not seen this before.

As during the energy price explosion following the Russian attack on Ukraine, the CO₂ price is currently not affected. Yet it was largely responsible for the decline in power prices in mid-February. At EUR 76/MWh, the front-year product saw a yearly low—triggered by several reports and statements about the outlook for the CO₂ market, which oscillates between the competitiveness of European industry and climate necessity. On the one hand, the cost of decarbonization required to achieve climate targets will necessitate a much higher price than the one currently traded; on the other hand, a price of EUR 100/t is considered too high. Both German Chancellor Merz and Slovak Prime Minister Robert Fico struck the same chord by calling for a revisi-on of the concept or a delay of the EU ETS by four to five years. This uncertainty lasted only two days before the market calmed again. Nevertheless, it reflects the change in sentiment in climate policy.

Back to the Middle East. All exports from Qatar—and thus around 20% of globally produced LNG—pass through the strait in the Persian Gulf. In terms of magnitude, this is comparable to the loss of Russian pipeline supplies in 2022, with one key difference: a permanent closure appears hardly conceivable. In the event of a prolonged closure, not only around 20% of global LNG production would be missing, but also about 20% of global oil production. Some experts speak in this context of a renewed energy crisis and oil prices of USD 100/bbl and gas prices of EUR 90/MWh. The latter would represent almost a tripling compared to the current gas price level. However, without an assessment of the duration of the war and the transport disruption, any statement would be unserious. What is clear is that a sustained reduction in supply would drive prices high enough to force a noticeable decline in demand, with corresponding effects on the global economy.

It is probably a naive idea that a military operation could create the conditions for democratic and stable structures within a maximum of four weeks. Militarily, the overarching objective is to prevent Iran from carrying out attacks, and for energy supply and prices that is ultimately what matters. A 2025 report prepared for the US Congress helps to put this into military perspective: it mentions that Iran could disrupt the Strait of Hormuz with mines, missiles, speedboats, and other means, but that the United States would have the capability to restore shipping routes quickly, provided that no sea mines had been deployed (which corresponds to the current state of knowledge).

Amid all this speculation, the facts in brief (as of 04 March 2026): Currently no ships are passing through the strait. Iran has announced that it will enforce the closure. Oman reported that two ships were hit. Insurers and shipping companies are withdrawing and instructing vessels to drop anchor. Around 20 LNG carriers are already waiting west of the strait, out of a total of about 150 to 200. Ports in the Persian Gulf are still operating, although there are reports of disrupted GPS signals. There are also reports that production facilities in Qatar at Ras Laffan have been attacked by drones. Other production sites in the region are beginning to bring personnel to safety, most recently at the Shaikan oil field in Iraq, which has temporarily shut down production of around 40,000 barrels per day. In addition to the transport disruption, there is therefore the real risk that production capacity could be sustainably damaged.

The analogy with 2022 helps to interpret the market reaction. When Russia invaded Ukraine, gas markets reacted violently and the front-quarter doubled within a few days. After that, the situation gradually calmed, and only when supply actually declined noticeably did prices rise to the record highs known today. The market evaluates not only facts but also risks. It would be presumptuous to assume that all possibilities can be assessed correctly, just as it would be too simplistic to dismiss the market reaction as implausible.

One thing must be said amid all the uncertainty: storage levels in Europe are low and increase the potential for price spikes. In the end, these price spikes will be what balances a reduction in supply through a reduction in demand. Unlike previous energy crises, oil and gas are affected simultaneously. A fuel switch to heating oil will therefore be economically unattractive, meaning price elasticity declines due to limited substitutability. Coal consumers benefit and are not affected in a comparable way. As a result, the fuel switch se-parates more clearly again and the price dispersion in power markets increases. The value of flexibility therefore rises, even if it “only” allows demand to be reduced during expensive hours. At the same time, the Austrian premium on electricity prices will increase if the economics of gas-fired power generation deterio-rate relative to coal.

We deliberately focus here on a sober analysis of energy markets. The human dimension is therefore not ignored, but remains outside the scope of this assessment. All the more, we hope for rapid de-escalation and peaceful developments. “War is the continuation of politics by other means.”

Yours,

Felix Diwok

For the Inercomp team