Israel-Iran Escalation Hits a Low-Storage Market

11th June 2026

Energy markets remain highly sensitive to supply risk, with bullish drivers outweighing the improving short-term picture. A long UK gas system, stronger wind output, higher solar generation, improving nuclear availability and cooler seasonal weather have helped ease some immediate pressure. However, the wider risk backdrop has intensified, with low EU storage, Norwegian maintenance, reduced wind forecasts and a sharp escalation in the Middle East keeping upward pressure on UK gas and power contracts. 

Forward prices have eased, but risk remains 

Gas and power prices have come off the highs seen in March, but they remain above pre-conflict levels. That matters because the market is no longer pricing panic, yet it is still carrying a clear risk premium. Upcoming contracts continue to reflect a market that is more comfortable than it was at the peak, but still exposed to supply shocks. 

For UK businesses, this is a difficult buying environment. Waiting for a further fall may feel logical when prices have softened, but the downside now looks more limited than the upside. A single disruption to supply, shipping, weather or storage refill progress could quickly reprice winter contracts. 

Low storage leaves Europe exposed 

EU gas storage is around 42%, compared with a five-year average of 62%. That is the central concern for Winter 26. Europe still needs to attract gas into storage, and lower inventories mean there is less protection if supply is disrupted or demand rises unexpectedly. 

The commercial implication is clear. Sum 26 is already important because Europe is competing for LNG to refill storage. Win 26 carries the highest risk if refill targets are missed. Sum 27 may inherit a risk premium if Europe exits winter with low inventories, while Win 27 remains exposed if stocks fail to normalise. 

In a normal year, markets can often absorb summer disruption. At storage levels near 41%, the same disruption can have a much larger price impact because the buffer is thin. Norwegian outages, Asian heatwaves, US LNG disruption, European heatwaves, low wind generation, Nordic hydro shortfalls and French nuclear constraints have all appeared repeatedly in recent summers. This year, their impact could be sharper. 

El Niño adds global LNG competition 

A strong to Super El Niño is becoming increasingly likely. The market is watching Summer 2026, when there is an 82% chance of El Niño development, with Autumn 2026 expected to be the period when markets start pricing potential impacts. Winter 2026 is flagged as the first meaningful UK impact, while Summer 2027 is the peak risk period. Winter 2027 could also see spill-over effects. 

For UK buyers, El Niño risk is not just about UK weather. It can tighten the LNG market globally. Hotter conditions in Asia could lift cooling demand in China, Japan and South Korea, drawing cargoes away from Europe. Weak monsoon conditions could increase gas-fired generation. Drought risks may reduce hydro output in South America and other regions, again increasing LNG demand. 

There are also risks closer to home. Low rainfall and elevated temperatures could reduce Nordic hydro reserves, tightening the European power balance and increasing reliance on gas-fired generation. Prolonged heat and low river levels could restrict French nuclear output, supporting regional power prices and gas demand. 

Iran war risk has escalated once again 

The Middle East remains a key source of volatility, and the latest escalation has made the risk harder to ignore. Over the weekend of 7 to 8 June, Israel struck military targets in western and central Iran, with explosions reported in Tehran, Isfahan, Tabriz and Karaj. Iran retaliated with at least six waves of missiles targeting Israeli air bases, including Nevatim and Tel Nof. 

The shipping risk has also widened. Yemen’s Houthis fired a ballistic missile at Israel and declared a total ban on Israeli-affiliated ships in the Red Sea. That brings renewed pressure on the Red Sea route at the same time as Hormuz remains a live concern. Iran’s ambassador to Moscow also confirmed that the Strait of Hormuz will remain under Iranian control, with mandatory transit fees of $1.5 million to $2 million per ship and 300 ships already signed up to the toll system. 

For energy buyers, the concern is duration. The market is not reacting to a single headline, but to the possibility that higher shipping costs, tighter LNG availability and elevated insurance premiums become embedded for longer. Even if prices ease on diplomatic language, the physical clean-up is slower: demining Hormuz could take up to 30 days, tanker availability may take 1 to 6 months, port and export operations may need up to 12 months to go back to a semblance of normalcy, and insurance costs could take 6 to 18 months to recover. That makes waiting for a clean reversal risky, particularly for buyers still exposed to Win 26.  

New LNG is coming, but not soon enough 

A new wave of LNG capacity is expected across the US, Canada, Qatar and East Africa. Canada is ramping up across 2025 to 2026, US projects are commissioning or under commissioning across 2026 and 2027, and further US capacity is under construction for 2027 to 2028. Qatar’s 2026 to 2028 supply outlook remains dependent on conflict resolution. 

This future supply is helpful, but it does not solve Europe’s immediate problem. Storage remains critically low, Europe has limited time left to refill before winter, and Ras Laffan has been offline since March, removing around 20% of global LNG supply. Alternative supplies helped in April and May, but peak summer demand will now determine whether storage targets can be met. 

Traders’ View 

Most of the good news is already reflected in current pricing. Additional LNG supply, normal weather and stable LNG exports are largely in the market. The remaining surprises are more likely to push prices higher than lower, particularly for Win 26 and the later seasonal contracts. 

For businesses with open volume, this is a window to review exposure before weather, storage and geopolitical risks become more visible in the forward curve. Fixing at least part of your requirement can protect budgets while leaving room to manage any future downside. Buyers with renewals due across Winter 26, Summer 27 or Winter 27 should not assume today’s relative calm will last. 

For live support on current prices, contract timing and risk management options, contact the NGP trading desk at [email protected].