Longspur Equity Research

Disruption to LNG flows through the Strait of Hormuz has injected a fresh layer of risk into global energy markets, with potentially important consequences for UK power pricing. While the market currently views the shock as temporary, Longspur argues that even a short-lived disruption could materially widen electricity price spreads in FY26, improving the revenue environment for battery storage and other flexible energy assets. If the disruption proves more persistent, the upside for storage could extend well beyond the current year.

Key Takeaways:

LNG disruption is lifting UK power prices:
A reduction in LNG flows through the Strait of Hormuz has pushed up both UK gas and electricity forward prices, creating a more supportive backdrop for flexible generation and storage.

Gas prices have moved sharply higher:
Longspur highlights that Summer 2026 UK NBP gas forward prices rose 96% to 134p/therm, while equivalent electricity forwards increased 57% to £102/MWh.

Storage spreads should improve in FY26:
Higher gas-driven peaking power prices are expected to widen the spread between low and high electricity prices, directly improving arbitrage conditions for battery storage across durations.

The upside is asymmetric:
Longspur notes that low prices are partly floored by feed-in tariff and ROC-related dynamics, while peak prices remain much less constrained. That tilts the price duration curve more positively for storage operators.

Markets still assume this is temporary:
So far, oil and gas futures suggest traders see the disruption as short term rather than structural, with the expectation that flows can recover relatively quickly if conflict subsides.

A prolonged conflict would be more meaningful:
If disruption persists, the current boost to electricity volatility could evolve into a more structural change, extending benefits for storage assets into FY27 and potentially beyond.

UK storage is particularly well positioned:
Because UK power prices remain strongly influenced by gas-fired marginal generation, higher gas prices can have an outsized effect on volatility and storage spreads.

Longspur’s core message is that geopolitical disruption is not just a macro risk, it may also create a meaningful earnings tailwind for electricity storage. Even if LNG disruption through Hormuz proves temporary, FY26 could see stronger storage economics as elevated gas prices widen UK power spreads. Should the conflict become more prolonged, the benefit for flexible energy assets could become more durable and more material.