23JUN

Spark stays negative, French edge erodes

4 min read

11:42UTC

TTF settled EUR 62.4/MWh on 22 July and EUA carbon broke EUR 83.20, both power-clearing inputs still rising as the France-Germany day-ahead discount compressed to EUR 5.37.

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Key takeaway

The negative German spark now holds across sessions, and France's day-ahead discount has shrunk to EUR 5.37/MWh.

TTF settled EUR 62.4/MWh on Wednesday 22 July and held EUR 61.9 into Thursday 23 July ¹, its highest since the US-Israel-Iran war began and up from EUR 59.135 on 20 July . EUA carbon broke a fresh high of EUR 83.20/tonne on 22 July ², up from EUR 80.14 on 16 July . Both inputs the 20 July inversion turned on are still climbing.

German day-ahead had reached EUR 156 on 16 July, and the spark turned briefly positive ; a week on, gas and carbon have pushed back past it. At roughly 0.2 tonnes of CO2 per MWh, EUA at EUR 83 alone adds about EUR 16.6/MWh to a CCGT's marginal cost before the gas leg, so carbon, not gas alone, drives the inversion this week. The spark reverses only if German day-ahead rises to meet the gas-and-carbon stack, and the 21 to 23 July tape does not show it.

That same German gas-set stack compressed the France-Germany day-ahead spread to EUR 5.37/MWh on 23 July, Germany clearing EUR 117.65 against France's EUR 112.28 ³. On 30 June the spread held around EUR 71.50 even after French output cuts ; three weeks of gas-and-carbon strength have closed almost all of it. EDF's reactors are running, yet TTF at EUR 62 plus EUA at EUR 83 lifts the German marginal price above France's nuclear-set floor. The German stack, not the French fleet, sets continental clearing this week.

Deep Analysis

In plain English

European power stations that burn gas have to pay two separate costs: the gas itself, and a permit for every tonne of carbon dioxide they release, called an EUA (EU Allowance). The EU deliberately makes fewer of these permits available each year to push emissions down, so their price tends to rise over time regardless of what else is happening in energy markets. This week both costs, gas and carbon, hit fresh highs on the same day. Most coverage focuses on gas, driven by tension near the Strait of Hormuz, a narrow shipping route for Middle Eastern oil and gas. But the carbon permit price is climbing for its own separate reason, a long-planned EU policy to squeeze supply, and that part of the story would keep pushing power costs up even if the Hormuz situation calmed down tomorrow.

Deep Analysis

Root Causes

The EU ETS cap contracts on a fixed annual schedule set by the Fit for 55 package, roughly 4.3% a year through the current phase, independent of any single week's gas news. That mechanical tightening means EUA has been drifting toward higher clearing levels across 2026 regardless of the Hormuz situation, and 22 July's fresh high sits on that pre-existing trend rather than being caused by the same shipping risk moving TTF.

The two legs are correlated in this instance mainly because both cleared on the same trading session under the same general risk-on tone, not because carbon markets are structurally exposed to a Gulf chokepoint. Treating the EUR 83.20 print as confirmation of gas-driven contagion into carbon risks missing the cap-tightening trend that predates 20 July entirely.

What could happen next?

Meaning
EUA's contribution to negative spark economics is running on the ETS's own multi-year cap-reduction schedule, not on Hormuz shipping risk, so the two drivers can diverge even though they moved together this week.
Immediate · Reported
Consequence
A Hormuz de-escalation that brings TTF down would not automatically restore a positive spark spread if EUA continues climbing on its scheduled cap trajectory.
Medium term · Reported
Risk
Desks reading the spread as a pure gas-risk trade may be under-hedged against the carbon leg's independent structural rise.
Short term · Reported

Source Landscape

This story draws on neutral-leaning sources

Primary parallel: The July 2019 seizure of the Stena Impero in the strait of Hormuz produced an immediate freight and war-risk premium on Gulf-transiting cargoes that peaked within days and then decayed over roughly six weeks as insurers repriced risk downward once no further seizures followed and transit volumes proved resilient.

Counter-parallel: The 2022 post-invasion European gas repricing shows the opposite pattern: TTF's initial spike did not decay on a similar timeline because the underlying supply loss, pipeline gas from Russia, was structural and permanent rather than a transient risk premium, so prices reset to a new higher range rather than reverting.

The open question for the current Hormuz premium is which pattern it follows: a 2019-style decay once shipping data confirms no closure, or a 2022-style structural reset if flows are genuinely disrupted rather than merely threatened.

For a German CCGT operator, EUA is not a background cost but roughly a third of marginal generating cost at current TTF levels, meaning the carbon leg alone can flip a plant from in-the-money to out-of-the-money without any change in the gas price at all. A trading desk reading the spread purely off TTF is missing that the ETS cap's own trajectory is now doing comparable work to shipping risk in setting the floor under German power costs.

Structurally, this decouples the spark spread's recovery path from Hormuz de-escalation alone: even a full resolution of the shipping risk narrative would leave the ETS cap's scheduled tightening in place, meaning the carbon leg's contribution to negative spark economics persists on a multi-year basis that a single geopolitical de-escalation cannot reverse.

Consensus view: The market reads this week's joint EUA/TTF highs as a single Hormuz-driven risk trade, since both cleared their session peaks on 22 July.

Set against that, the EU ETS's Market Stability Reserve has been withdrawing surplus allowances from auction since 2024 under the Fit for 55 linear reduction factor, tightening the permit supply on a schedule that runs independently of Hormuz shipping risk, so at least part of EUA's climb reflects that pre-existing mechanical trend rather than the same shock moving TTF.

Counter-view: The correlation may still be coincidental rather than structural: EUA's 22 July high tracks the same session as TTF's own peak, and a carbon price rising on a pre-set emissions cap alongside a gas price rising on tanker risk is two separate mechanisms producing one number that happens to move together, not one mechanism driving both.

The Oxford Institute for Energy Studies' Quarterly Gas Review, Issue 33 (16 July), adds a further complication on the gas side alone: weather is simultaneously driving renewables, hydro and temperature-related nuclear curtailments this cycle, making 'a clean read on gas more difficult' even before the carbon leg is considered, and OIES flags a Persian Gulf LNG supply recovery as 'back in doubt'.

Key tension: Whether the EUA leg is now doing independent work in setting German CCGT marginal cost, meaning a Hormuz de-escalation would leave the spark still negative, or whether the two legs remain correlated enough that a gas-side resolution unwinds both at once.

Sources:investing.com·Prestige Business Solutions

Mentions:TTF →EUA →Germany →Persian Gulf →CCGT →France →Iran →Russia →Strait of Hormuz →Israel →EDF →Oxford Institute for Energy Studies →

First Reported In

Update #29 · Germany's caverns stop buying gas

investing.com· 23 Jul 2026

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Causes and effects

Caused by

Gas prices a strait nobody can verify

TTF's 20 July Hormuz-risk settlement kept climbing into the 22-23 July settlement.

Occurred 19 Jul 2026

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EUA carbon slips back below EUR 81

EUA carbon's 16 July close under EUR 81 gave way to a fresh 22 July high.

Occurred 16 Jul 2026

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German power climbs to EUR 156, spark flips

The 16 July positive spark inverted again as gas and carbon outran day-ahead power.

Occurred 16 Jul 2026

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France stays the cheaper power leg

The German gas-set stack compressed the France-Germany day-ahead spread to EUR 5.37/MWh near-parity on 23 July, erasing the discount France held on 30 June despite EDF's nuclear output cuts.

Occurred 30 Jun 2026

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This Event

Spark stays negative, French edge erodes

TTF and EUA rising together for a second session makes the negative spark a standing condition, not a one-day print, and nearly erases France's day-ahead discount.

Led to

Carbon sits still as gas and power dive

TTF and EUA rose together on 22 July (ID:5233); by 27 July gas and power had both reversed sharply while carbon alone held flat, splitting the prior joint move.

Occurred 26 Jul 2026

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Different Perspectives

Turkiye

Erdogan followed the Pakistani delegation to Jeddah for an instrument that has not been signed. Ankara's entry widens Saudi Arabia's defence architecture beyond the existing Pakistan pact, adding a second non-Gulf military partner mid-conflict.

Oman

Muscat is the corridor's broker but has published nothing about the arrangement Fars describes on its behalf. The account leaves Oman administering outbound traffic only, a narrower role than the shared route its mediation has rested on since 1979.

Pakistan

Islamabad sent Sharif, Munir and Dar to Jeddah to widen a defence commitment it has honoured in cheaper registers since March, when Dar invoked the Saudi mutual defence pact. Jeddah tests whether that hedge becomes a binding trilateral instrument with Turkiye.

United States

Washington rejected the Majlis Hormuz bill outright while CENTCOM's own tally kept climbing to 49 vessels redirected since 14 July. Both instruments tightened in the same week Trump promised the strait would reopen soon.

Iran

Iran's foreign ministry is selling a phased Hormuz corridor through Oman and denying any percentage cargo tariff, while its own Majlis is legislating fines to 20% and a bar on Israeli-linked cargo. The two accounts, from the same government, do not agree with each other.

Saudi Arabia

Riyadh published a target forecast, not an attribution, for the campaign it says the Najran strike previewed. That keeps an Article 51 case available while it formalises a trilateral defence architecture with Pakistan and Turkiye.