Business Energy Market Update: March 2026

Despite the increasing tensions in the Middle East that dominated the news last week, day ahead prices closed the month of February a solid 25% lower than the previous month. Power traded at £76.5 MW/h and gas was 79 p/th, although at the time of writing, power had fully recovered its February losses and gas was 20 p/th higher than its previous record for the year to date.

Prior to the Iran attacks, forward contracts for power had been steadily falling as temperatures eased. Gas contracts had held firm through to autumn this year before rising slightly, as the need to refill storage facilities after winter provided some upwards pressure.

The rapidly rising wholesale costs are at odds with the recent changes to the domestic price cap which last month saw the announcement of a reduction of around 7% on a typical household bill; set to take effect from 1 April. The discount has been achieved in two ways: firstly by moving 75% of the 'Renewables Obligation' from home energy bills into general taxation, and secondly by ending the charge which paid for the Energy Company Obligation - an energy efficiency scheme for low income households.

Despite the reduction, it is important to note that the increases in transmission costs - which have caused such consternation amongst business users - will also be levied against homes, blunting the above discount to the tune of an extra £65 per year.

It can be argued that moving some non-commodity costs from energy users to tax payers is progressive, especially where vulnerable users are concerned, but spiralling non-commodity costs need to be reined in to achieve meaningful and lasting reductions to the price of energy in the UK.

The recent attacks in Iran have understandably sent shockwaves throughout global energy markets, and at the time of writing, wholesale prices are nearing their previous 12-month highs. Currently the markets have taken the view that this is a short term event, and although forward contracts have seen gains, when looking at 24 and 36-month contracts, the curve is much flatter although still on the rise.

While roughly 20% of global energy shipments pass through the strait of Hormuz, and Qatar temporarily closing the world’s largest LNG terminal should cause concern, sight should not be lost of the fact that the US dominates the LNG market, where in the last 12 months they have shipped 111 tankers compared with Qatar’s 10.

Looking at the shock to the market more broadly, the world is not the same as it was in 2022. LNG capacity has grown by approximately 40% and the EU is well placed to continue receiving shipments of gas, albeit at an increased cost with little threat to supply. In addition, the timing of the attacks falling at the end of winter in the northern hemisphere is fortuitous.

That being said, the markets will not tolerate the closure of such a vital artery for long and after the recent cold weather, European gas stocks are in dire need of topping up.

If you have any questions about how the Iranian attacks might affect your business, or any utility questions in general, the team at CUS are available on our usual channels to help.