Electricity Prices Surge: A Scorching July and August Ahead

Rising electricity prices are signaling a challenging July and August, especially in the Middle East, despite a temporary lull in tensions between Israel and Iran. The mere possibility of the Hormuz Strait being closed has significantly increased prices from €34 to €41/MWh, affecting natural gas prices as well. This surge is accompanied by intense speculative activity in the TTF natural gas futures market. Italy’s energy minister warned that a closure of the strait could result in a 20% loss of gas supply, forcing the country to seek alternative sources at higher costs. In Greece, June’s average wholesale price remains stable around €85/MWh, but forward contracts indicate much higher prices for the upcoming summer months. For instance, the July contract on the European Energy Exchange (EEX) has jumped from €112 to €130/MWh, with August at €131/MWh. Similar trends are observed across Europe, with significant increases expected into next winter, indicating ongoing uncertainty. Major European markets have seen a 10% rise in electricity futures over the past few days, with Germany’s November contract now trading at €110/MWh, December at €106, and January at €112/MWh. Corresponding prices in France are €91-€107, Italy €130, Bulgaria €130-€135, and Romania €133-€137/MWh.