The European carbon market climbed to an intraday high of €87.03/tCO₂ on Thursday before closing at €86.88/tCO₂, posting a daily gain of nearly 2%, its largest increase in three weeks. This marked the third consecutive session of gains, reinforcing the market’s recent bullish momentum.

The rebound is particularly noteworthy as it comes immediately after the annual emissions compliance deadline, a period typically associated with softer demand for allowances as compliance-driven buying fades, removing an important source of support for EUA prices.

The upward trend was supported, as in the previous session, by strength in the European gas market and growing optimism that the EU and UK could soon reach an agreement to link their respective emissions trading systems.

In the gas market, the TTF front-month contract reached a new three-week high, driven by escalating tensions in the Persian Gulf and disruptions to Norwegian gas supplies. Meanwhile, European gas storage levels remain at their lowest in 15 years, adding to concerns over supply availability ahead of the winter season.

However, market sentiment appeared to shift on Friday morning, with European carbon prices stabilizing as energy markets moved lower. The change followed comments from US President Donald Trump, who, according to Reuters, said Washington was engaged in “productive discussions” with Iran and that no attack was planned ahead of the November 3 midterm congressional elections. The remarks helped ease immediate geopolitical concerns, weighing on energy prices and limiting further gains in the carbon market.

Looking ahead, forecasts of milder weather could curb further upward momentum in EUA prices by reducing energy demand, while ongoing discussions surrounding the EU ETS review may introduce additional uncertainty over the market’s regulatory outlook. Together, these factors could limit the scope for further gains in the near term, despite the recent recovery in prices.