The European carbon market opened lower today, with EUA Dec’26 briefly trading below €68 — a level last seen in April 2025. The decline mirrored similar moves in equity markets and came despite a sharp spike in gas prices, reinforcing the view that EUAs are currently trading more in line with broader macro and equity sentiment than with energy fundamentals.

As expected, TTF front-month gas prices jumped at today’s open, briefly trading nearly 28% above Friday’s settlement as traffic through the Strait of Hormuz effectively halted amid the Iran conflict. Around 20% of global LNG exports pass through the narrow waterway in the Persian Gulf, linking Middle Eastern producers to global markets.

“A hypothetical longer disruption of natural gas supply transit through the Strait of Hormuz lasting more than two months would likely lift European natural gas prices above €100/MWh to trigger more significant global gas demand destruction,” Goldman Sachs warned.

On Sunday, multiple ships in the strait came under fire, opening a new front in the conflict. In the most optimistic scenario, Wood Mackenzie warns that it could take several weeks to reestablish export flows.

Meanwhile, European equities started the week deep in the red as investors priced in the risk that surging energy costs could fuel renewed inflationary pressures. The Euro Stoxx 50 fell 2% at the open and, at the time of writing, selling momentum remains firmly in place.

Attention in the European carbon market is now split between two key drivers: the political debate ahead of this year’s scheduled EU ETS revision and escalating developments in the Middle East. We expect EUAs to remain under bearish pressure, weighed down by policy uncertainty on the one hand and disruptions to Middle Eastern LNG supply on the other.