Despite a bearish opening on Monday, European carbon prices recovered steadily over the following sessions, with the EUA Dec’26 contract closing Friday at €86.94, just €0.06 above Thursday’s close, but securing a 3% weekly gain.

EUAs climbed from a low of €82.35 on Monday to a weekly high of €87.49 on Friday, reflecting a steady increase throughout the week. This rally has lifted prices more than €10 above their 17 July low of €76.92, recorded following the publication of the EU ETS reform proposal.

Price movements were considerably more pronounced in the European gas market, where front-month TTF futures surged nearly 9%, driven by forecasts of colder weather across Northwestern Europe and persistent geopolitical tensions in the Middle East.

Europe remains particularly vulnerable ahead of the winter season, with gas storage levels hovering around 73%, well below the 83% recorded at the same time last year, raising concerns over the continent’s ability to withstand potential supply disruptions or a prolonged period of colder-than-expected weather.

According to ENTSOG, the European association of gas transmission system operators, “the European gas infrastructure remains sufficiently flexible to meet demand”. However, the association also cautioned that “low storage level at the beginning of the winter and uncertainty around LNG availability require continued attention throughout the season.”

Turning to the start of the new trading week, European energy markets faced conflicting pressures on Monday morning amid contrasting geopolitical developments over the weekend. Reports of Houthi strikes on Saudi Arabia provided bullish support to gas prices, while an energy ceasefire announcement by US President Donald Trump concerning Russia and Ukraine exerted downward pressure on the markets.

However, as the day progressed, both gas and carbon prices moved higher, supported by downward revisions to temperature forecasts across Northwestern Europe and growing uncertainty surrounding the reported ceasefire. As Russ Mould, investment director at AJ Bell, noted, “There is scepticism over any energy ceasefire given Russia attacked various energy facilities in Ukraine after Trump made his statement.”

Beyond energy market fundamentals, ongoing discussions over EU ETS reform are expected to remain an important factor shaping carbon price dynamics. Meanwhile, negotiations over the potential linking of the EU and UK emissions trading systems could offer additional support, with a potentially stronger impact on the British carbon market.