Electricity prices in the Iberian wholesale market surged by 90% over two days amid escalating tensions between Israel and Iran.
Data from the operator managing the Iberian daily and intraday market (OMIE) reveals that average daily prices for Portugal exceeded 106 euros/MWh in the Iberian Mibel market. The same applies to Spain.
This figure represents a 90% increase in just two days.
The pressure on prices is linked to the impact of the Iran-Israel conflict on oil and natural gas prices, which in turn is influencing wholesale market prices.
Why are energy prices affected?
The BBC highlights that oil prices fluctuate in response to significant geopolitical events and the global economic climate, so it’s no surprise to see oil prices reacting with volatility to the conflict between Israel and Iran.
The price of Brent crude for August delivery fell by 1.35% to $73.23 on Monday on the London futures market, following cross-attacks between Israel and Iran not affecting oil flow in the region.
Market analyst Manuel Pinto explained that “the market’s biggest fear is the increase in oil prices that would result from Iran blocking the Strait of Hormuz.”
In this context, the UK Foreign Secretary, David Lammy, stated in Parliament that an escalation of war would involve “real risks” for the global economy, given that Iran is one of the world’s largest oil producers and one-fifth of the world’s total oil consumption passes through Hormuz.
Will fuel and gas prices rise?
When oil prices rise, it is expected that this will reflect in fuel prices, but the BBC notes that this only occurs if energy prices remain high for a prolonged period.
The current situation is “very significant and concerning,” stated Richard Bronze, head of geopolitics at the consulting firm Energy Aspects, to the BBC. However, it does not mean it will have as significant an impact as the Ukraine war or previous Middle Eastern conflicts.
On Friday, Brent’s price saw a sharp increase of 7.02%, due to fears of a disruption in oil supplies from the Middle East amid the worsening war between Israel and Iran.
This seven percent rise was the biggest since Russia’s invasion of Ukraine on February 24, 2022, after which energy prices escalated.
