Energy Market Update

A more volatile market as winter approaches

The UK energy market has become significantly more unsettled over the past six months, following a period of relative stability through late 2025 and early 2026.

The key change came in March 2026, when conflict in the Middle East caused wholesale gas prices to rise sharply. Prices subsequently eased during the early summer, but have risen again through July and August, with wholesale gas prices reaching their highest levels since January 2023.

For energy users, this matters because gas remains a major influence on the cost of electricity. When gas becomes more expensive, electricity prices generally follow.

What is driving prices higher?

Geopolitical uncertainty remains the biggest influence. Disruption to gas supplies and LNG shipments through the Middle East has increased competition for available gas around the world. European LNG prices have more than doubled compared with a year ago.

European gas storage is also a concern. Storage levels entering winter are significantly lower than usual, meaning there is less of a supply cushion should demand increase or further disruption occur.

The UK is particularly exposed because of its reliance on imported gas and relatively limited large-scale gas storage. This leaves the market sensitive to both international events and changes in European supply.

There are, however, some positives. Renewable generation continues to reduce the amount of gas required to generate electricity, helping to limit some of the upward pressure on electricity prices.

Looking ahead

The next six months are likely to remain volatile rather than predictable.

If geopolitical tensions ease, LNG flows recover and Europe enters a relatively mild winter, prices could fall back from current levels. Conversely, a cold winter, further disruption to global gas supplies or continued low European storage could push prices higher.

Market uncertainty makes energy procurement strategy increasingly important. Rather than trying to predict the exact price at a particular point in time, WME’s role is to continually assess market conditions, identify opportunities and manage risk around customers’ energy requirements.