Energy Market Update – February 2026

For most of February, the energy market story was relatively reassuring. Milder weather and strong wind generation pushed wholesale gas and power prices down from January’s highs, and businesses were starting to turn their attention to April’s TNUoS increases. Then, on 28 February, the US and Israel launched strikes on Iran. Everything changed overnight.

As we publish this update, Iran has retaliated with missile strikes across the Gulf region, major shipping companies have suspended transit through the Strait of Hormuz, Qatar has halted LNG production after attacks on its facilities, and Saudi Arabia’s largest domestic refinery has been shut following a drone strike. European gas prices surged more than 25% on 2 March, the biggest single-day jump since August 2023, while Brent crude leapt above $82 a barrel. Around 150 ships are reported stranded on either side of the strait, and vessel traffic through the waterway has collapsed by roughly 70%.

This is the most serious disruption to global energy flows since Russia’s invasion of Ukraine in 2022. For UK businesses, the immediate question is what this means for energy costs. We’ll cover that, but first, here’s how February played out before the crisis hit.

February in review – why wholesale prices moved

Weather and demand: February started cold before temperatures climbed well above seasonal norms from mid-month, more than 4°C above average across northwest Europe by late February. UK gas demand eased to around 218 mcm/day as heating requirements fell. Wind generation picked up strongly, peaking at nearly 59% of the generation mix on 22 February. That combination took significant pressure off gas-fired power stations that had been working overtime since January.

LNG supply (pre-crisis): Before the escalation, US LNG exports continued at near-record levels and European terminals received healthy flows. South Hook maintained output above 50 mcm/day. Global LNG supply was forecast to grow by around 10% across 2026 as new export projects come online, which had been weighing on longer-term gas contracts. That picture has now been dramatically disrupted by events in the Gulf.

Norwegian pipeline flows: Norway continued to supply a significant share of UK gas through the Langeled pipeline, though an unplanned outage at the Oseberg field and brought-forward maintenance reduced total Norwegian exit nominations to around 317 mcm/day at points during the month. Langeled flows dipped by roughly 9 mcm/day during the disruption. With the Strait of Hormuz now effectively closed, Norwegian pipeline gas becomes even more critical to UK supply.

Storage levels: EU gas storage slipped to around 30% full by late February, down from roughly 48% at the same point last year. The UK’s own limited storage capacity, with particularly low levels at Humbly Grove and Storengy UK, leaves the system highly exposed. Current withdrawal rates suggest an end-of-winter level above 19%, which is manageable but leaves a significant refilling task for summer. The last time European storage was this low heading into spring was the winter of 2021-22, just before Russia invaded Ukraine. That comparison feels uncomfortably relevant right now.

Carbon markets: Carbon prices fell sharply through February before the crisis hit. UK ETS allowances dropped to around £46 – 48/tonne, down nearly 17% from January, as limited liquidity and political uncertainty weighed on the market. EU ETS prices also declined, hitting a seven-month low of around €69/tonne before recovering to roughly €73/tonne. German Chancellor Friedrich Merz’s criticism of the ETS and growing uncertainty around the EU’s Carbon Border Adjustment Mechanism drove the sell-off.

Prices before the crisis: By 27 February, day-ahead gas had settled around 73-77p/th, well down from the mid-80s earlier in the month. Day-ahead power was around £68-74/MWh. Summer 2026 gas sat at 76.71p/th and Summer 2026 power at £69.35/MWh. Over the preceding 30 days, gas had risen around 5% while electricity fell around 4%, a reminder that the two fuels don’t always move in lockstep. The front of the curve had given back most of January’s gains, and markets felt cautiously calm.

The iran crisis – what happened and why it matters for your energy bills

On 28 February, the United States and Israel launched a joint military operation against Iran, striking targets across the country including Tehran. Iran immediately retaliated with missile and drone strikes against US military installations in Qatar, Kuwait, the UAE and Bahrain, as well as attacks on Israel and other regional targets. The conflict is ongoing and the situation remains highly fluid.

For energy markets, the critical developments are:

Strait of Hormuz effectively shut down: Iran’s Revolutionary Guard broadcast warnings to vessels that no ships are allowed to pass. Major shipping companies including Hapag-Lloyd and CMA CGM have suspended transit. Vessel traffic through the strait has collapsed by roughly 70%, with around 150 ships stranded on either side. At least three tankers have been attacked and a seafarer killed. On a typical day, this waterway carries around 20% of the world’s traded oil and around 20% of global LNG exports.
Qatar halts LNG production: QatarEnergy has halted liquefied natural gas production after Iranian attacks damaged facilities at two of its main gas processing bases. Qatar is one of the world’s largest LNG exporters, accounting for roughly 20% of global supply. This is a direct hit to global gas availability, not just a shipping disruption.
Saudi refinery shut: Saudi Aramco has closed its Ras Tanura refinery, its largest domestic facility, following a drone strike, further disrupting regional energy infrastructure.
OPEC+ responds: In a meeting planned before the conflict, OPEC+ agreed on Sunday to boost oil production by 206,000 barrels per day in April, slightly more than expected. However, analysts note this is a drop in the ocean compared to the potential loss of supply if the Strait of Hormuz remains blocked.

Market reaction (2 March): Brent crude surged as much as 13% to above $82 a barrel, its highest level since January 2025. The European gas benchmark (TTF) jumped more than 25%, the biggest single-day move since August 2023, with some reports of intraday spikes above 50%. Asian LNG prices rocketed nearly 39%. UK gas prices hit a 12-month high. Analysts at Citi expect Brent to trade between $80 and $90 this week. If the Hormuz disruption continues for 30 days, ICIS analysis suggests the European TTF gas benchmark could soar above €90/MWh, roughly a threefold increase from recent levels.

What this means for UK businesses: The UK generates a significant proportion of its electricity from gas-fired power stations, and wholesale gas prices directly feed into business energy contracts. Higher wholesale gas also pushes up the marginal price of electricity. If this disruption is short-lived and tensions de-escalate, the market impact may prove temporary. But if the Strait of Hormuz remains effectively closed for weeks, or if Qatari LNG production stays offline, the UK will feel it through higher wholesale costs that will eventually feed into business energy contracts and the domestic price cap. The Energy and Climate Intelligence Unit has already warned that this crisis is a “reminder that the UK is still too dependent on gas, the price of which is set on international markets beyond the UK’s control.”

Other headlines your business should note

Ofgem cuts household price cap 7% from April (25 February): The energy price cap drops to £1,641 from 1 April, the lowest in almost two years, largely driven by the government shifting Renewables Obligation and Energy Company Obligation costs from bills to general taxation. Households save an average of £150/year. However, this was announced before the Iran crisis. If wholesale prices remain elevated, future price cap periods could see significant increases.
TNUoS charges confirmed: 60%+ increase from April (January/February): NESO published final tariffs for 2026/27, confirming average TNUoS charges will rise more than 60%. Total revenue collected jumps from £4.3 billion to £7 billion. For businesses, this means substantially higher electricity standing charges from 1 April regardless of how much energy you use. Even “fixed” contracts may be affected, as most suppliers treat TNUoS as a pass-through cost.
British Gas boss warns electricity bills will exceed crisis-era peaks by 2030 (13 February): Centrica CEO Chris O’Shea told the Energy Institute that electricity prices in 2030 will be higher than at the peak of the Ukraine crisis, with two-thirds of costs coming from “system costs” rather than wholesale energy. The £28 billion grid upgrade programme (part of a £90 billion pipeline) will be funded through network charges on bills. That prediction was made before Iran, events this week make it feel even more plausible.
Non-commodity costs now nearly 60% of business electricity bills (February): Cornwall Insight analysis confirms that charges including TNUoS, distribution costs, Capacity Market, CfDs and the Nuclear RAB levy now make up nearly 60% of a typical business electricity bill. Only around 40% relates to the actual energy you use. Managing your total cost of energy now requires attention to far more than just the wholesale price.

What could move prices in march

What to watch	Why it matters	Likely effect on prices
Duration of the Strait of Hormuz disruption	Around 20% of global oil and 20% of global LNG passes through this waterway daily. Vessel traffic has collapsed by 70% and major shipping companies have suspended transit. Every day the strait stays effectively closed adds pressure to global energy supply.	Prices will likely remain elevated or climb further while the strait is disrupted. A swift resolution and reopening could see prices retreat sharply. A prolonged closure could push gas prices toward 2022 crisis levels.
Qatar LNG production restart	QatarEnergy has halted LNG production after attacks on two of its main processing bases. Qatar accounts for roughly 20% of global LNG supply. The UK and Europe are heavily reliant on LNG imports to keep the lights on and homes heated.	Prices will likely keep climbing if Qatar stays offline. A restart of production would provide significant relief to gas markets, though shipping through Hormuz would also need to resume.
Broader military escalation or de-escalation	Iran has struck targets across multiple Gulf states including Saudi Arabia, the UAE, Kuwait, Bahrain and Qatar. Saudi Arabia’s largest refinery has been shut. If the conflict widens further or other producers’ infrastructure is damaged, the supply impact multiplies.	Prices likely to surge if conflict spreads or more infrastructure is hit. Prices likely to stabilise if diplomatic channels open and hostilities wind down.
European gas storage refilling	Storage at just 30% full means Europe already faced a big refilling task before the Iran crisis. If LNG supply is disrupted through the spring and summer injection season, Europe may struggle to rebuild stocks ahead of next winter.	Prices likely to remain firm through summer as refilling competes with reduced supply. Risk of a repeat of the 2021-22 storage squeeze if disruption persists.
April regulatory cost increases	TNUoS charges jumping 60%+, Nuclear RAB levy continuing at £3.66/MWh, and RIIO-ET3 network cost increases all hitting from 1 April. These were coming regardless of events in Iran.	Business electricity standing charges will rise from April regardless of what happens in the Middle East. This cost pressure is now layered on top of wholesale volatility.
Late-season cold weather	Forecasters have flagged below-seasonal temperatures from around 7 March for the UK. A cold snap on top of the current supply disruption would accelerate storage withdrawals and increase gas-for-power demand at the worst possible moment.	Prices likely to spike further if cold weather arrives while supply routes remain disrupted.
UK nuclear availability	Multiple nuclear units are offline: Hartlepool 2 (since June 2025), Heysham 2 unit 7 (tripped mid-February), Torness 2 (planned shutdown through early April), and Heysham 1-1 (planned 610MW outage from 2 March). This keeps the grid reliant on gas-fired generation, the very fuel whose supply is now at risk.	Power prices likely to stay elevated while nuclear capacity remains constrained, particularly if gas supply tightens further.

What this means for your energy budget

Let’s be direct: the situation is serious but it’s too early to panic.

If the Strait of Hormuz reopens quickly and Qatar restarts LNG production within days, markets could settle back down relatively fast. Energy markets have a history of spiking on geopolitical events and then retracing once the immediate threat passes. But if this disruption lasts weeks rather than days, the impact on UK business energy costs could be substantial.

Here’s why the UK is particularly exposed. We generate a large share of our electricity from gas. We rely heavily on LNG imports, including from Qatar. Our domestic gas storage is limited. European storage is already at its lowest pre-spring level since 2021-22. And on top of all this, non-commodity costs, which now make up nearly 60% of a typical business electricity bill, are about to jump from 1 April thanks to the TNUoS increase. So, businesses face a potential double hit: rising wholesale costs from the Iran crisis and rising regulatory costs from April’s scheduled changes.

The businesses that will weather this best are the ones that have already locked in competitive wholesale rates on fixed contracts. If you haven’t done that yet, the window may be narrowing. We don’t know how long this crisis will last, and waiting for “perfect” timing is a gamble that gets riskier by the day.

How dyce energy turns insight into advantage

Your challenge	How Dyce helps	Benefit to you
Markets are swinging wildly and you don’t know whether to fix now or wait for things to calm down	Our Yorkshire-based team watches markets daily and helps you time your renewal. We’ll cut through the noise and give you a straight view on whether fixing now makes sense for your business, or whether a short-term strategy is more appropriate.	You get honest, practical advice based on live market conditions, not guesswork.
April’s TNUoS increase is hitting on top of potential wholesale price rises from the Iran crisis	We help you understand your full cost exposure, not just the unit rate, and secure 12 to 36-month fixed contracts that lock in both commodity and non-commodity costs where possible.	Budget certainty even in volatile markets. You know exactly what you’re paying regardless of what happens next.
Sustainability is a priority for your business alongside cost control	We offer green energy options including 100% renewable electricity and carbon-neutral gas for customers who have this as a priority.	You can meet your environmental commitments with the same budget certainty as a standard fixed contract.
You need to act fast before prices move further	Our digital process can get you switched and live on a new contract in as little as 48 hours, with our UK-based team supporting you at every step.	Fast protection from rising prices with proper, personal support from our Yorkshire team.

Your action plan for march

Review your contract position immediately: Check when your current contract ends and whether your supplier treats TNUoS as a pass-through cost. If your deal expires in the coming months and you’re not yet fixed, you’re exposed to both wholesale volatility from the Iran crisis and April’s regulatory increases. Don’t wait to find out what both of those look like on the same bill.
Consider fixing sooner rather than later: Markets moved sharply on 2 March but the full impact of the Iran crisis hasn’t been priced into longer-term contracts yet. If the disruption is prolonged, forward prices will likely follow the front of the curve upwards. Locking in a competitive rate now could save you a great deal compared to renewing in a few weeks’ time if the situation deteriorates.
Ask about green energy options: If sustainability is a priority for your business, ask about our green energy options including 100% renewable electricity and carbon-neutral gas. Crises like this are a reminder of how exposed gas-dependent energy systems are to geopolitical shocks.
Get a no-obligation quote: Head to dyce-energy.co.uk/quote for pricing based on your actual consumption and location. In fast-moving markets, our quotes are valid for a limited window, so acting quickly gives you the best chance of securing favourable rates before the next market move.

The events of 28 February have changed the energy landscape overnight. We don’t know how long this crisis will last, and neither does anyone else. What we do know is that businesses with fixed contracts in place are protected, and those without are increasingly exposed. Don’t wait for the next headline to make the decision for you. Get your quote sorted and lock in budget certainty now.