Hormuz Reopening Stalls, Taking Market Optimism With It
13th August 2026
Progress towards reopening the Strait of Hormuz stalled over the weekend after Iran signalled that the Oman arrangement alone would not be sufficient to restore commercial shipping. Oil prices rose on Monday in response. This setback followed a week in which UK gas and power markets had softened across much of the curve, as geopolitical concerns eased and supply expectations improved. This calmer backdrop is now being tested, with the latest Hormuz developments reintroducing uncertainty into a market that had begun to price in a more stable near-term outlook.
The fundamentals behind that pricing leave little room for further disruption. European gas storage sits around 58% full, competition for LNG remains and extreme heat is putting further pressure on European power generation. For UK energy buyers, the recent fall in forward prices still creates a useful window to review Winter 26 exposure. However, renewed tension around Hormuz strengthens the case for reassessing how much of that exposure to leave open.
Gas and power prices move lower
UK gas and power markets moved lower across much of the curve last week, with the strongest declines concentrated in nearer-term contracts. September 26 gas fell 5.77% to 4.64p/kWh, while Winter 26 prices dropped 4.62% to 4.66p/kWh. Power followed the same direction, with day-ahead prices falling 15.82% week on week to 9.11p/kWh and Winter 26 declining 4.05% to 11.68p/kWh.
The broader move reflects a softer near-term risk premium, but underlying supply concerns remain. European gas storage is still below its five-year average, leaving the market sensitive to colder winter demand or renewed supply disruption. Europe’s reliance on LNG also means international developments can feed quickly into UK pricing.
Further along the power curve, some summer contracts edged higher as attention turned to generation availability during periods of extreme heat. Low river levels have once again restricted nuclear and hydro output, increasing reliance on gas-fired generation, particularly when cooling demand is elevated. Namely, Hungary’s nuclear output fell 90% week on week as Danube River levels dropped. Likewise, issues affecting French nuclear generation add to the uncertainty.
Markets reassess Middle East optimism
Energy prices continued to take their cue from developments between the US and Iran during the first week of August, with sentiment shifting as the outlook for the Strait of Hormuz changed.
Markets initially softened after further US strikes were called off on the 3rd August and indirect peace talks continued through Oman. A proposed arrangement to gradually restore commercial shipping through Hormuz added to hopes that tensions could ease. This optimism faded over the weekend, however, after Iran indicated that an agreement involving Oman alone would not be enough to return traffic to normal. By Monday, oil prices had moved higher as uncertainty around the timing of a full reopening increased.
Europe remains highly exposed to developments in global LNG markets. Restrictions through Hormuz continue to add uncertainty, particularly with around 17% of Qatari LNG capacity affected and repairs to Oil infrastructure expected to take three to five years. At the same time, Asian LNG prices remain at a premium to European markets, increasing competition for available cargoes and keeping Europe exposed to shifts in global demand.
There are still other factors helping to limit the upside. Demand remains structurally weak compared with historic norms, r, and global LNG capacity is expected to grow by 5.6% in 2026, supported by a 27% increase in US and Canadian output. These factors are providing some balance, but the market remains highly responsive to any change in the geopolitical outlook.
Traders’ View
Near-term gas and power pricing has remained relatively subdued over the past few weeks, giving businesses with open Winter 26 exposure an opportunity to review their position at lower market levels. However, this period of softer pricing may prove short-lived, with the underlying risk picture largely unchanged. Restricted Hormuz traffic, low European storage and continued competition for LNG leave the market vulnerable to renewed volatility, while extreme heat is adding pressure further along the power curve.
For buyers, the key question is how much of that risk to leave open. With prices having eased across much of the near-term curve, there is a stronger case for reviewing existing exposure now rather than allowing procurement deadlines to dictate the timing of future purchases. The appropriate level of cover will depend on each business’ budget requirements and appetite for further market movement.
That may mean securing part of your Winter 26 requirement while retaining some exposure if the market continues to soften. Businesses still carrying significant open volume should use current market conditions to reassess the balance between budget certainty and potential further downside.
To review your current exposure or discuss the right level of cover for your business, contact the NGP trading desk for live market guidance at [email protected].
FAQ:
What is the Strait of Hormuz?
The Strait of Hormuz is a narrow waterway connecting the Persian Gulf to the Gulf of Oman and the wider Indian Ocean. It is one of the most strategically important shipping routes in the world, serving as the primary passage for oil and liquefied natural gas (LNG) exports from the Middle East. Around a fifth of global oil supply and a significant share of global LNG trade passes through the strait.
Where is the Strait of Hormuz located?
The Strait of Hormuz sits between Iran to the north and Oman and the United Arab Emirates to the south. At its narrowest point it is approximately 33 kilometres wide, with shipping lanes in each direction just three kilometres across. Its location makes it a critical chokepoint for energy exports from Qatar, Saudi Arabia, Kuwait, Iraq and the UAE.
Why is the Strait of Hormuz important to global energy markets?
The strait is the single most important transit point for seaborne energy trade. A large proportion of the world’s LNG exports, particularly from Qatar, pass through it. Any disruption to shipping through Hormuz reduces the volume of LNG and oil available to global markets, increases competition for alternative supply and pushes up prices. For Europe, which has become increasingly reliant on LNG since the loss of Russian pipeline gas, disruptions through Hormuz have a direct impact on gas and power pricing.
Why has the reopening of the Strait of Hormuz stalled?
Negotiations to restore commercial shipping through the strait have been conducted indirectly through Oman. W Iran has linked a full reopening to wider demands of the United States, including an end to military action, troop withdrawals and compensation. This has pushed the expected timeline for a resolution further out and renewed uncertainty in energy markets.
How do Strait of Hormuz tensions affect UK gas and power prices?
The UK is exposed to Hormuz disruptions through its dependence on global LNG markets. When supply is restricted, available cargoes become scarcer and competition with Asian buyers intensifies, feeding directly into UK wholesale gas and power prices. Forward contracts are particularly sensitive to shifts in the geopolitical outlook, with prices responding quickly to any change in the likelihood of a resolution.
For UK energy buyers, this creates an environment where periods of easing tension may offer temporary windows of lower pricing, but underlying supply risks remain. Reviewing forward exposure during these windows, rather than waiting for procurement deadlines to force decisions, can help manage the uncertainty.