Geopolitical risk moved back to the centre of commodity pricing, with Iran-related escalation concerns lifting both oil and European gas despite otherwise improving near-term supply signals. At the same time, European policymakers and regulators continued to tighten the feedback loop between energy affordability, market design, and the credibility of sustainability disclosures, creating a more complex operating backdrop for utilities, heavy industry, and supply-chain decarbonisation programmes.

Macro and others

Crude prices held onto the biggest daily jump since October as markets repriced the probability and potential duration of a US-linked Iran conflict scenario. The key sensitivity is not Iranian production alone, but the tail risk to regional flows and logistics across the Strait of Hormuz, which would quickly transmit into broader energy benchmarks. The near-term picture remains a mix of risk premium on top of an underlying debate about oversupply, with inventory data and OPEC+ expectations still acting as an anchor on rallies.

European gas followed oil higher, reflecting the same conflict-driven shipping and supply-chain risk, particularly for LNG. Even though price levels remain well below the January highs, the market continues to trade as structurally headline-sensitive given storage constraints and the coming refilling season. Weather can still soften the balance at the margin, but geopolitical disruption risk has become the dominant volatility driver.

On the regulatory side, the ECB raised a clear warning that the Omnibus-driven simplification of EU sustainability reporting could materially reduce the transparency and comparability investors rely on for risk pricing and supervision. The message is that easing compliance burden can quickly become a capital markets problem if it undermines decision-useful data, particularly on climate and biodiversity risk factors that feed into transition and physical risk assessments.

In UK-US climate diplomacy, Ed Miliband defended the UK’s cooperation with California Governor Gavin Newsom after criticism from President Trump. The practical implication here is less about symbolism and more about continuity of subnational and cross-border collaboration, even as federal-level rhetoric becomes more confrontational.

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Carbon markets

EU governments backed the Commission’s proposed ETS2 market stability reserve adjustments aimed at reducing the probability of price spikes and improving predictability during the early years of the scheme. The notable design choice is a more responsive, staged release of allowances and a larger potential intervention volume within defined limits, which collectively signals a strong political preference for price containment as ETS2 approaches its 2028 start.

In voluntary markets, Amazon expanded its supplier-facing carbon credit service to include instruments linked to lower-carbon shipping fuels and superpollutant neutralisation, alongside more established nature and removal categories. Strategically, this points to continued experimentation with insetting-style credits and supply-chain procurement models, but it also reinforces the need for buyers to maintain robust quality screens as product types proliferate.

Renewables and biofuels

Germany advanced a Baltic cross-border offshore wind initiative with Latvia and Lithuania, centred on a large-scale project paired with an interconnector concept. This fits the broader European direction of treating offshore wind, grids, and cross-border infrastructure as a single package, with regional collaboration increasingly necessary to manage connection, balancing, and security-of-supply objectives.

Italy’s proposed electricity reform to reimburse gas-fired generators for EU ETS costs triggered a sharp market reaction, because it effectively changes how carbon costs flow through marginal pricing into wholesale power. The immediate takeaway is that policy risk is now a tradable input in Italian forward curves, and that perceived changes to carbon pass-through can reprice both conventional and renewable revenue expectations.

That dynamic showed up quickly in developer sentiment, with Edison indicating merchant renewables economics could deteriorate under the reform, potentially shifting capital allocation away from Italy unless the framework preserves sufficient price signals for new build. This is an early indicator of how intervention aimed at affordability can collide with investment incentives, especially for projects relying on wholesale exposure.

In biofuels, Brazil’s near-term agenda is tilting toward higher blending mandates and operational rules for biomethane certificates, with the next phase of regulation expected to shape market scale and international recognition. In the US, new IRS guidance on the 45Z clean fuel production credit was welcomed by biodiesel producers as a step toward restoring investability and stabilising output after policy uncertainty disrupted production decisions. In Spain, the Bilbao LNG terminal added a certified bio-LNG service via documentation-based sustainability certification, signalling continued momentum for drop-in, certificate-backed decarbonisation options in maritime and heavy transport fuels.