The European carbon market briefly climbed to a two-week high during Wednesday’s session, recovering from weaker levels seen in the early hours of trading, before closing at €73.33 and posting a daily gain of 4%.

The main key driver was the gas price with TTF front month increasing by a massive 40% on Monday and continued to strengthen in yesterday’s trading when it settled 22% higher following the LNG supply disruption in the Middle East.

Europe is less exposed to the conflict than Asian buyers, given that over 80% of LNG cargoes moving through the Strait of Hormuz are delivered to Asia. Nevertheless, the ongoing tensions could heighten competition for global LNG supplies between regions, as seen during the energy crisis that followed the invasion of Ukraine.

The LNG supply disruption comes at the worst possible time for Europe, with gas storage sites being depleted at the fastest pace in five years due to below-average winter temperatures that have increased heating and power demand, leaving inventories only about 30% full.

In this context with elevated gas prices, switching to coal from gas power generation could be an option for several European nations. “Gas was more favorable recently,” said a UK-based carbon trader quoted by S&P Global.  “But now coal is better, and today coal is rising rapidly as well. We will see if gas will keep outpacing coal on the upside.”

According to Platt calculations, clean dark spreads in the German market, with margins for 45% efficiency units turned lucrative at Eur2.50/MWh for the third quarter, compared to the same period last year when the indicator was negative.