Global energy and carbon markets this week reflected a delicate balance between geopolitical risk, regulatory recalibration and accelerating infrastructure investment. Oil markets remained anchored by uncertainty surrounding US-Iran nuclear negotiations and shifting trade flows, while Europe intensified debates around carbon pricing, electrification and industrial competitiveness. At the same time, corporate decarbonisation milestones and major grid investments underscored continued structural momentum in the energy transition, even as governments adjust policies to manage costs and security concerns.

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Macro and energy markets

Oil prices stabilised near recent levels as traders focused on upcoming US-Iran nuclear talks, which could significantly alter supply expectations. Brent held around $71 per barrel amid elevated geopolitical risk premiums, while increased exports from Middle Eastern producers added complexity to market dynamics. Meanwhile, Russia and Iran deepened discounts to Chinese buyers as displaced crude volumes accumulated offshore, highlighting intensifying competition in Asian markets and reinforcing downward pressure on benchmark prices. In Europe, uncertainty around Russian LNG imports continued to affect long-term contracts, with companies evaluating contractual obligations in light of potential EU restrictions.

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Carbon markets

European carbon markets faced renewed political scrutiny as Italy signalled plans to request a suspension of the EU Emissions Trading System pending reform, citing concerns over industrial competitiveness and energy costs. Germany also revised its heating legislation, scrapping renewable heating mandates and fossil fuel restrictions in favour of gradual green fuel quotas beginning in 2028. These changes may increase emissions in the near term and potentially strengthen future demand for carbon allowances under the upcoming ETS2 system. Globally, the carbon credit landscape advanced with the issuance of the first credits under the UN’s Paris Agreement Crediting Mechanism, marking an important milestone in establishing a unified international carbon market framework. Meanwhile, aviation-related credit demand continues to rise, with new projects entering the CORSIA pipeline to meet expected offsetting obligations as international air travel rebounds.

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Renewables, infrastructure and hydrogen

Infrastructure investment remained central to the energy transition, highlighted by Engie’s £10.5 billion acquisition of UK Power Networks. The deal reflects the growing strategic importance of grid assets as electrification accelerates and renewable capacity expands. The European Commission also advanced plans to promote electrification, improve grid integration and strengthen energy security, with proposals expected later this year aimed at lowering power costs and enhancing system resilience. Germany further reinforced its hydrogen strategy by extending accelerated permitting to projects using carbon capture and storage to produce hydrogen from natural gas, signalling support for multiple hydrogen pathways to scale supply.

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Corporate sustainability and climate policy

Financial institutions and corporates continued to evolve their climate strategies. The Net Zero Asset Managers initiative relaunched with more than 250 signatories, reflecting a shift toward more flexible and pragmatic approaches to climate investing amid changing political and economic conditions. Deutsche Telekom achieved operational net zero emissions ahead of schedule, reducing emissions by more than 94 percent since 2017 through renewable electricity procurement, energy efficiency measures and electrification of its fleet. These milestones demonstrate continued progress toward corporate decarbonisation despite broader policy and market uncertainty.

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Environmental regulation and air quality

China announced stricter air quality standards aimed at reducing particulate pollution and improving public health, continuing its long-running campaign to combat urban smog. The move signals sustained commitment to environmental improvements even as global policy approaches diverge.

Overall, the week highlighted a transition landscape defined by simultaneous acceleration and adjustment. While infrastructure investment, corporate decarbonisation and international carbon market development continue to advance, governments are increasingly recalibrating policies to balance climate ambitions with economic competitiveness, energy affordability and security. These tensions are likely to shape market dynamics and policy evolution throughout 2026.