ECB economists say eurozone energy price shock smaller than 2021-22
Oil futures extended their slide to a fourth consecutive session on Monday as Saudi Arabia said it expects its damaged East-West pipeline to return to about half its capacity within days and as President Trump prepared to meet Gulf leaders at the United Nations General Assembly in New York. West Texas Intermediate fell 3.8% to $96.49 a barrel and Brent crude dropped 3.1% to $100.65 a barrel in U.S. morning trading, according to Dow Jones Newswires market reports. The declines extended an earlier Asian session in which front-month WTI had slipped 0.5% to $99.76 a barrel and Brent had eased 0.3% to $103.54 a barrel.
The slide reflected easing concerns over the pipeline disruption and optimism about efforts to revive diplomatic engagement between the U.S. and Iran. Saudi Arabia said it expected the East-West pipeline to return to about half its capacity within days after being shut down by a drone attack. Admiral Brad Cooper, head of U.S. Central Command, said over the weekend that oil and cargo volumes through the Strait of Hormuz had reached their highest level in the past six months over the prior two weeks. President Trump is set to meet Gulf leaders on the sidelines of the U.N. General Assembly this week, with diplomatic efforts to end the conflict in Iran described in Monday’s early European trading as putting downward pressure on oil.
European energy stocks opened the week lower as the oil decline weighed on integrated majors. In that morning’s European session, Brent had fallen 1.7% to $102.08 a barrel and WTI had slid 2% to $98.33 a barrel, before both benchmarks extended to the larger declines reported later in the U.S. morning. In London, BP fell 1.6%, while Shell, Italy’s Eni and Spain’s Repsol traded around 1% lower. France’s TotalEnergies declined 0.8%.
Analysts cautioned that the easing in spot prices did not eliminate longer-term supply risks. Analysts at ANZ Research said that “the market is still focused on the longer-term fallout from the attacks by the Houthi militant group on Saudi Arabia,” adding that “the broadening of the Middle East conflict also increases the odds of the conflict persisting for the foreseeable future, and keeping oil supply from the Persian Gulf constrained.” Data provider Kpler said Saudi Arabia’s efforts to reroute oil exports were pushing ship-to-ship transfers in the Gulf of Oman close to their limits, straining local support services.
Economists at the European Central Bank said in an economic bulletin that the eurozone energy price shock from this year’s Middle East conflict has been smaller in scale than the 2021-22 price spike. The shift toward electricity generated from renewables has damped the impact of wholesale gas prices on wholesale electricity prices, they said, while passthrough of wholesale prices to retail prices has sped up for gas overall but remains less intense for electricity, with variation among countries. “This implies that wholesale energy price dynamics require close monitoring, as their passthrough to consumer prices remains an important source of near-term volatility in inflation,” the ECB economists added.
In company-specific notes, Berenberg analysts said a proposed Portuguese solidarity tax on energy profits would create a headwind for Galp Energia, with the windfall levy potentially imposing a 33% rate on 2026 Portuguese profits exceeding 20% above the average of 2024 and 2025, and likely covering Galp’s refining and commercial profits. The analysts estimated the incremental tax exposure at around 240 million euros, though they noted “considerable uncertainty” around the figure pending the tax’s final structure. The tax is not expected to affect the downstream merger with Moeve. Separately, Berenberg raised its Ebitda expectations for Galp’s refining unit by 170% to 405 million euros, citing elevated product cracks, and increased its 2026 cash flow from operations estimate by 44%.
In Malaysia, TA Securities downgraded Tenaga Nasional to hold from buy and cut its target price to 13.80 ringgit from 18.00 ringgit, citing higher fuel subsidy costs. Analyst Hafriz Hezry estimated the utility would bear 120 million ringgit to 150 million ringgit in additional costs from September to December under a government decision to raise the threshold for fuel surcharges and other electricity charges to 800kWh a month from 600kWh, potentially reducing 2026 net profit by 2.0% to 2.5%. Separately, RHB analyst Max Koh maintained a buy rating with a 16.50 ringgit target and said Tenaga shares appeared oversold after a 12% decline from recent highs, with second-half earnings expected to strengthen.