On Friday, the European carbon price hit its highest level in three weeks, taking gains to around 6% so far this week. The upward trend was supported indubitably by the gas market with traders worried about the new risks posed by the events that started last weekend.

TTF front-month traded as high as €56.100/MWh on Friday morning, up almost 50% since last Friday’s settlement of €38.231/MWh. Gas prices are boosted by insecurity in the Middle East as well as new concerns over Europe’s vulnerability to sabotage of gas infrastructure.

“Gas production curtailment in Israel due to the ongoing conflict is likely to tighten global balances, but the impact on European gas prices is marginal for now,” said Goldman Sachs on Monday. However, besides the uncertainty regarding the conflict in the Middle East, a new worry emerged.

The director of Finland’s intelligence service spoke to reporters on Thursday, about the damage to the gas pipeline under the Baltic Sea, between Finland and Estonia. “Involvement of a state actor in this job cannot be ruled out.” Meanwhile, finish authorities are investigating evidence found at the damaged pipeline.

“The pipeline sabotage in the North Sea and the suspected Russian involvement causes fears that similar things could happen to other and more critical pipelines in Europe,” said Energi Danmark in a note this morning, referring to the incident that took place last year.

Friday morning, there are no signs that the uptrend on both the gas and carbon markets will reverse significantly as calmer waters are not in sight. We expect the correlation with the gas market to continue. Furthermore, speculators could take advantage of the price fluctuation and engage in short-term trading.