Risk Premiums Return to Energy Markets

14th May 2026

Energy markets remained volatile this week as traders balanced improving storage injections against persistent geopolitical disruption and growing weather-related risks. The ongoing US-Iran conflict continues to shape global LNG markets, while low European storage levels and concerns around El Niño are adding further pressure to forward pricing. Although injection rates have recently improved, the market remains vulnerable heading into summer.

For UK businesses, the concern is no longer centred on a single event. Markets are now reacting to a combination of prolonged LNG disruption, tight storage conditions and growing global competition for gas supply.

LNG Markets Continue to Feel the Impact of Gulf Disruption

The US-Iran conflict remained the dominant market driver this week, with further military exchanges reinforcing concerns around the duration of disruption across the Strait of Hormuz and wider LNG shipping routes.

The market has already been trading the impact of the conflict for months. Reduced vessel traffic, elevated insurance costs and ongoing security risks have materially affected LNG flows into global markets, particularly into Europe. Fresh reports of Iranian attacks on shipping vessels and subsequent US military strikes added further uncertainty around how long these conditions could persist.

Although ceasefire discussions briefly eased sentiment earlier in the week, both sides continue to maintain hardline positions around nuclear negotiations. Traders are increasingly pricing in the likelihood that disruption extends throughout summer rather than expecting a rapid diplomatic resolution.

This remains particularly important for the UK market given the growing dependence on imported LNG. Current estimates suggest around 78% of UK LNG supply during 2026 could originate from the US, increasing exposure to any disruption.

Storage Levels Leave Markets Exposed

Despite injection rates reaching their strongest levels since September 2025, European gas storage remains at its lowest point in four years. That leaves the market with a limited buffer against further supply disruption heading into the higher demand winter period.

The issue for traders is not simply current storage levels, but whether injections can continue uninterrupted throughout summer. Any further disruption to LNG imports, extreme weather events or infrastructure outages could significantly slow replenishment efforts and place additional pressure on both short and long-term contracts.

Markets remain highly sensitive to storage risk because recent history demonstrated how quickly conditions can tighten. During the energy crisis, the largest price spikes occurred well after the initial geopolitical shock, driven by heatwaves, reduced storage and increasing LNG competition.

That comparison is becoming increasingly relevant again as the market enters another summer with limited supply flexibility.

El Niño Adds Pressure to Global Supply

Weather forecasts are also becoming a growing concern for energy markets, with forecasts currently placing the probability of El Niño conditions between 70% and 90%.

For global energy markets, El Niño typically creates multiple pressures simultaneously. Higher global temperatures increase cooling demand, raising gas consumption for power generation, while hydro output often falls due to drought conditions. Nuclear outages and disruption to coal logistics can also tighten overall energy supply balances.

For LNG markets specifically, stronger cooling demand across Asia can intensify competition for cargoes at the same time Europe is attempting to rebuild storage inventories. Wildfires and extreme weather conditions also create operational risks for LNG infrastructure and shipping routes.

Forward Contracts Still Present Opportunity

One of the more notable developments in current pricing is the relative value still available in longer-dated contracts despite the broader risk backdrop.

Prices beyond 2028 remain within some of the lowest ranges seen since the energy crisis, with certain gas contracts trading below 2p. In contrast, earlier delivery periods continue carrying stronger premiums as the market prices ongoing summer and winter risk.

This pricing structure reflects a market that remains heavily focused on immediate supply concerns. Contracts tied to Winter 26 and Summer 27 remain particularly exposed to developments around storage injections, LNG imports and geopolitical escalation.

For businesses reviewing procurement strategies, current conditions continue to support early engagement rather than delaying decisions in the hope of significant summer softening. Markets are already operating within a disrupted supply environment, and further escalation or weather-driven tightening could quickly reprice forward contracts higher.

Traders’ View

For prices to soften through summer, the market needs stable fundamentals, strong storage injections and reliable LNG supply. Current conditions make that outcome improbable.

European gas storage remains at a four-year low, leaving limited protection against further disruption. At the same time, El Niño risk is elevated at 70% to 90%, increasing the potential for stronger global cooling demand and reduced supply availability through lower hydro output, nuclear outages, coal disruption and tighter pipeline flows.

This is already a constructive backdrop for gas prices before accounting for the ongoing Gulf disruption, where Strait of Hormuz risks remain unresolved and could continue affecting LNG flows over the coming months.

Longer-dated contracts remain in one of the lowest ranges seen since the energy crisis, with sub-2p gas available in parts of the curve beyond 2028. For businesses with open exposure, this presents a clear opportunity to secure value while the market still offers it.

The risk of waiting is that a further deterioration in storage, weather or LNG supply conditions could quickly reprice Winter 26, Summer 27 and longer-term contracts higher.

For live market guidance, contract options and tailored support, contact NGP’s trading desk at [email protected].