Developments in the Energy Market in June 2026

Geopolitical Tensions and Heat Wave Cause Volatility in the Energy Market

Summary
Two developments had a significant impact on the energy market in June. In the first half of the month, the announced ceasefire between the United States and Iran led to lower energy prices, as part of the geopolitical risk premium disappeared from the market. Later in the month, tensions rose again, partially reversing these price declines.

At the same time, an exceptional heat wave had a significant impact on European energy markets. Extremely high temperatures, a sharp decline in wind power generation, and rising demand for electricity for cooling caused significant price fluctuations in the spot market. As a result, electricity prices temporarily rose to record levels during the evening hours.

Futures prices for electricity fell slightly by 0.9% in June. The main cause was the decline in prices for natural gas, coal, and CO₂ emission allowances. However, this downward trend slowed midway through the month. Due to the persistent heat, electricity demand rose sharply across large parts of Europe, while wind power generation fell sharply. As a result, gas and coal-fired power plants had to be used more frequently to meet the higher demand for electricity. Since these plants have higher production costs than renewable sources, the costs of electricity production also rose. In addition, production constraints at French nuclear power plants—due to high cooling water temperatures—created additional upward pressure. As a result, the decline in the futures market ultimately remained limited.

This shows that the electricity market is currently driven not only by gas price trends but also by factors such as CO₂ prices, conventional generation capacity, and the limited availability of French nuclear power during hot spells.

Heatwave Causes Significant Price Fluctuations in the Day-Ahead Market
The spot market for electricity, on the other hand, saw a sharp rise in June. Although solar power generation increased by 5%, this did not offset the reduction in wind power. Over the entire month, approximately 25% less wind energy was generated than in the previous month. Wind conditions were exceptionally light, particularly in the second half of June, when electricity generation was, on average, approximately 40% lower than in the first half of the month. At the same time, the average outdoor temperature rose by about 5 °C compared to May. During the heat wave, from June 18 through 29, temperatures averaged as much as 7.5 °C higher than in the first half of the month and were about 3 °C above the seasonal average. On June 24, 25, and 26, the highest temperatures ever recorded for those days were measured.

This combination of exceptionally high temperatures, a sharp increase in electricity demand due to air conditioning, and limited wind power generation is also known as a “Hitzeflaute.” Especially during the evening hours, when solar power generation drops off and there is hardly any wind available, conventional power plants must meet the demand for electricity. As a result, electricity prices can rise sharply in a short period of time.

This was clearly evident on June 24, when the Dutch quarter-hourly price rose to €902.47 per MWh at 8:45 p.m. The higher electricity prices were also reflected in the number of negative hourly prices. In June, only 48 negative hourly prices were recorded—23 fewer than in May and as many as 79 fewer than in June of last year.

The gas futures market fell by 1.7% in June. Throughout the month, the market reacted strongly to developments surrounding the Strait of Hormuz. The announced ceasefire between the United States and Iran initially led to lower prices, as the market anticipated a lower risk of disruptions to the global energy supply. Later in the month, tensions rose again, causing part of the geopolitical risk premium to return.

Meanwhile, European gas storage levels remained relatively low. At the end of June, European gas storage facilities were about 49% full. Although this represented an increase of approximately 8% compared to the end of May, the level was still about 15% below the five-year average. As a result, the market remained vulnerable to new disruptions in gas supplies to Europe. Market participants also took into account the availability of LNG, Norwegian gas exports, and the pace at which European gas storage facilities are being filled ahead of winter.

Lower spot market prices despite a decline in LNG imports
Spot market gas prices fell slightly in June. At the beginning of the month, Norwegian gas exports fluctuated due to scheduled maintenance at several production facilities. As this work was completed, export capacity recovered toward the end of the month to approximately 93%, making more gas available to the European market.

At the same time, LNG imports to Europe fell to their lowest level in over 21 months. There were several reasons for this. Disruptions in the Strait of Hormuz had been limiting LNG transit for some time, while maintenance at various U.S. LNG export terminals temporarily reduced available supply.

In addition, a heat wave in Asia led to stronger demand for LNG for electricity generation there. As a result, Asian buyers were willing to pay higher prices, causing more LNG cargoes to be shipped to Asia rather than Europe. This kept the availability of liquefied natural gas for the European market limited.

Oil

The price of oil fell by 20.8% compared to the end of May, as a large portion of the risk premium disappeared from the market. As diplomatic talks between the United States and Iran progressed and shipping through the Strait of Hormuz cautiously resumed, confidence grew that large-scale disruptions to the global oil supply were subsiding.

Coal

The price of coal also fell sharply by 10.0%. Lower natural gas prices and improved market sentiment pushed the price of coal down. At the same time, demand for coal remained limited for much of the month. It was only during the heat wave that the use of conventional power plants temporarily increased, causing demand for coal to rise slightly as well, which partially slowed the price decline.

CO₂

The price of CO₂ emission allowances ended the month stable, with a slight decline of 0.6%. During June, the increased use of gas and coal-fired power plants during the heat wave temporarily created additional demand for emission allowances. At the same time, the market remained cautious in anticipation of the European Commission’s expected proposals for a revision of the Emissions Trading System (ETS), which prevented any major price movements.

Outlook

Although geopolitical tensions have eased somewhat in recent weeks, the energy market remains sensitive to new developments in the Middle East. In addition, the energy market remains sensitive to weather conditions, the availability of LNG and French nuclear power plants, and the pace at which European gas storage facilities are being filled ahead of winter. As a result, both the futures and spot markets are expected to remain volatile.