The energy landscape remains defined by a fragile stalemate as peace negotiations between the US and Iran stall. While a nominal truce persists, the continued naval blockade and the effective closure of the Strait of Hormuz are driving a sustained risk premium across oil and gas markets. In Europe, the focus has shifted toward mitigation, with the European Commission unveiling a suite of tax and coordination measures designed to shield the economy from a price shock that officials now warn could persist for a couple of years.

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Macro and Others

Market Stalemate and Geopolitical Deadlock: Oil prices extended gains for a fourth consecutive session, with Brent trading near 104 dollars and WTI around 95 dollars. The rally is fuelled by scepticism over the stalled peace talks, as Washington maintains a naval blockade to pressure Tehran a move Iran classifies as a violation of the April 7 ceasefire. Similarly, European natural gas futures climbed to 44.375 euros per megawatt-hour. Analysts suggest that until free navigation through the Strait of Hormuz is restored, the path of least resistance for energy prices remains higher.

EU Emergency Response and Tax Reforms: To cushion the blow of high energy costs, the European Commission has set out plans to coordinate summer gas storage refills and reduce electricity taxes. The strategy aims to make electricity cheaper than gas to incentivize a faster transition for industries and households. While the Commission has avoided aggressive market interventions like price caps for now, Energy Commissioner Dan Jorgensen emphasized that the damage to Middle Eastern infrastructure necessitates a rapid acceleration of local renewable and nuclear energy projects to ensure long-term security.

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Carbon Markets

EU ETS Review and Industrial Conditionality: Climate chief Wopke Hoekstra signalled that the upcoming July reform of the EU Emissions Trading System will focus on a "quid pro quo" for heavy industry. While the bloc may offer extra flexibility to help companies navigate the energy crisis, this support will be conditional on firm commitments to green investment. Chancellor Friedrich Merz echoed this sentiment in Berlin, advocating for a market-based approach that protects industrial competitiveness while maintaining decarbonization trajectories.

Benchmark Tensions and CORSIA Eligibility: Italy has formally urged the European Commission to freeze carbon benchmarks at current levels, warning that a proposed 17% tightening could trigger carbon leakage in sectors like cement and aluminium. Meanwhile, a draft document suggests the EU may tighten rules for the aviation offsetting scheme, CORSIA. The proposal could exclude existing Phase 1 credits—particularly those from high forest, low deforestation (HFLD) projects limiting eligible supply to units that meet more stringent additionality standards.

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Renewables and Biofuels

PPA Granularity and Grid Flexibility: The European Commission recommended that member states adopt shorter, more granular time units for Guarantees of Origin (GOs). By linking renewable certificates more closely to actual hourly generation rather than monthly averages, the EU hopes to encourage the use of demand-side flexibility and short-term energy storage. This shift is seen as essential for the growth of hybrid PPAs that combine wind, solar, and battery technologies.

Biofuel Market Divergence: In Northwest Europe, the spread between different classes of Hydrotreated Vegetable Oil (HVO) reached an all-time high of 450 dollars per ton. This is driven by a scarcity of Class IV offers and expectations that Germany and the Netherlands will abolish double counting for certain feedstocks starting in 2026. In the US, a House task force is readying new biofuel policies that would restrict exemptions to refiners with a total capacity under 75,000 barrels per day, while allowing for year-round sales of 15% ethanol (E15) blends.

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Corporate Sustainability and Regulation

Climate Risk Scrutiny and Finance: A group of investors managing 400 billion dollars has called for a regulatory review of HSBC, alleging that the bank's climate risk assessments are "excessively optimistic." This move reflects growing pressure on financial institutions to demonstrate how they account for probable losses related to climate instability. On the development side, British International Investment has launched a 1.5 billion dollar fund to back energy transition projects in India and Southeast Asia, aiming to provide a hedge against the gas shortages currently plaguing the region.

COP31 Priorities Incoming: COP31 President Murat Kurum stated that the upcoming summit in Turkey will focus on diversifying away from fossil fuels. Highlighting the Iran war as a catalyst, he argued that energy diversity is now a matter of national security. The summit is expected to focus on cutting carbon emissions to zero, potentially through a blend of clean energy adoption and carbon capture technologies.