After remaining largely unfazed by the sharp fluctuations across energy-related markets in recent sessions, the European carbon market finally showed signs of renewed correlation on Thursday, with EUA prices responding more visibly to developments in the wider energy complex.

The benchmark Dec’26 EUA contract closed the session at €81.82, up €0.73 on the day and marking its largest daily increase in two weeks. The advance was largely driven by a strong rally in European gas prices, with carbon’s renewed sensitivity to movements in the energy complex coming somewhat unexpectedly after several sessions of relatively weak correlation between the two markets.

European natural gas prices staged a strong recovery from three-week lows, jumping 6.42% in their best daily performance in ten weeks. The rally came amid renewed uncertainty over the timing of a potential reopening of the Strait of Hormuz, adding to supply concerns at a time when persistent heat across Europe continues to support gas demand.

The closure of the strategic waterway comes at a particularly challenging time for the European gas market, with storage inventories already standing at historically low levels for this point of the year. According to data from Gas Infrastructure Europe (GIE) available as of 5 August, European gas storage facilities were 58.1% full, around 12 percentage points below the level recorded at the same time last year and, according to Reuters, “the lowest for the time of year in records going back to 2011”.

Early trading signals from the European carbon market on Friday point to a continuation of the upward trend, with EUA prices maintaining the positive momentum seen in the previous session. European gas prices are also trading higher, although gains remain more moderate than Thursday’s sharp rise.

Meanwhile, prolonged heatwaves and drought conditions are placing additional strain on Europe’s energy system, boosting cooling-related electricity demand while constraining some sources of low-carbon generation. This could increase reliance on fossil-fuel-fired power generation and, consequently, demand for emission allowances, providing an additional bullish signal for carbon prices.