Energy markets increased to its highest level seen for some time, with the oil markets up almost 10% week on week and UK and European gas markets up 5% due to escalations in the Middle East. However, this week some of the risk premiums have eased as the market waits for further direction. In the oil markets Brent crude fell more than 4% yesterday on a possible Hezbollah-Israel ceasefire. This drop also filtered to the UK and European gas markets. As for today the market continues to keep an eye on global geopolitical developments which remains a significant risk. Goldman Sachs expects a peak upside of $10-$20 per barrel for Brent in the case of disruptions in Iranian production as the development of the conflict remains uncertain. However, in the absence of major disruptions, prices could stabilize around current levels this quarter, the bank said. Looking closer to the gas markets, fundamentally, the supply side remains strong with continued injections pushing gas storage levels higher, LNG continuing to head towards the region and the temperature outlook remaining close to seasonal normal keeping demand in check. However, with geopolitics firmly in play the markets are expected to remain volatile. A call between U.S. President Joe Biden and Israeli Prime Minister Benjamin Netanyahu, is expected today with talks to include discussion of any plans to strike Iran, according to a person familiar with the matter.
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