The Global Energy Context Week in Focus

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TL;DR

As Hormuz traffic resumed and markets treated the crisis as over, despite lukewarm progress on the peace talk front, the contest between two energy narratives continued: one calling for more oil and gas in the name of security, the other for a faster transition to avoid the next shock. This week the first prevailed, as AI-driven demand and a sober new read on the transition's pace sent confident signals for moving capital toward oil and gas expansion and climate rules toward revision in the name of security.

Week's Narrative in Focus June 29-July 6, 2026

As traffic through Hormuz gradually resumed during the week, markets quickly exhaled and behaved as though the crisis was over. The tension between two narratives about fossil fuels and energy security continued, with one side claiming more supply and the other an accelerated transition to avoid future shocks. This week the second seemed less prominent, in part because the Energy Institute's annual data release reminded the world again that bold execution is far harder than bold commitment. Oil and gas production and infrastructure expansion plans therefore kept unfolding around the world, as climate rules were revisited in the name of security, while the surge in electrification ran in parallel, European energy-intensive industries continued to quietly fade away, and data centres and big tech continued being added to the climate villain reputation band.

On oil, Brent traded at $71.58 on Friday, below its prewar level, Citi forecast $60 to $65 a barrel by year-end, and Goldman Sachs expects the market to swing to a surplus of over 3 million barrels a day next year. The gas market told a different story. Prices eased to around EUR 40/MWh, still about a third above prewar, but the risk sits in supply and storage rather than price. Europe is on track to enter winter with gas storage at 76%, its lowest in 15 years, falling to 70% on Goldman's estimate if Qatar's recovery slips by a month. Shell says 17% of Qatar's LNG capacity needs years of repair, and the EU ban on Russian LNG from January removes 14% of imports.

Despite the market optimism, Iran did not give up insisting on permanent control of Hormuz, with tolls on shipping from mid-August and force if its terms are refused, while the Doha talks closed with no progress on the nuclear file.

At the same time, Russia is considering a diesel export ban as it deals with a dire domestic fuel shortage after ongoing refinery and truck attacks by Ukraine. That could serve a second shock on distillate stocks already near 23-year lows. The same fuel crisis is pushing Russian buyers toward Chinese EVs, with plug-in hybrid sales up 125% so far this year. Natural gas is another replacement being tapped, with use of gas-conversion equipment up 35% year on year.

AI-driven demand is what legitimised the new wave of hydrocarbon supply expansion. US spending on fossil fuel power plants will beat China's this year for the first time in decades, at $50bn, on roughly 20GW of gas turbine orders in the first quarter alone to power data centres. Amazon and Google both reported record emissions, up 16% and 18%, as their AI build-out outpaced their climate targets. US clean power prices are forecast to rise 40 to 120% as subsidies end and data centres outbid other buyers. The same demand is shaping policy, with the EU set to weaken its data centre climate rules after lobbying by Amazon and Microsoft, letting offsets stand in for real cuts.

The expansion is physical and global. Canada committed to a 1mn barrel a day Pacific pipeline, and construction began on the infrastructure to develop the Sea Lion oil field off the Falklands, drawing protest from Argentina. China, in the meantime, is strengthening the coal-plus-renewables story. It expanded coal power and coal-to-chemicals capacity as a security backstop, while still installing half the world's solar and leading on battery storage. The Energy Institute's data put its electricity output at 222% above the United States, a scale that makes its choices highly consequential to the world's energy mix.

Climate rules are being revisited in the same security language. The World Bank retired its 45% and 35% climate co-benefit targets, and the European Commission is under pressure to suspend methane penalties for three years. Europe's energy-intensive industry is quietly leaving, with Covestro announcing up to EUR 4bn of investment in China and the UAE and telling the EU to choose which sectors to protect, against chemical output down 3.2% and exports down 12.4%. A corporate clean-energy retreat ran alongside it, as Air Products cancelled a $4.5bn Louisiana hydrogen complex and took a charge of up to $2.9bn, and US biofuel plants fell well short of Trump-era blending mandates.

The transition case looks shakier. The Energy Institute's annual review showed fossil fuels still at 86% of global supply and emissions up 1.1% in 2025, while scientists retired the most extreme climate scenario this year and a Nature study projecting $38tn in annual damage by midcentury was withdrawn, which the US administration read as vindication and used to stop counting climate costs in regulation. The counterargument, that the best-case scenarios are slipping out of reach too and that uncertainty argues for more caution, ran against the week's mood. A European heatwave estimated to have caused 12,000 excess deaths in three days set the backdrop, and the summer has only just begun.

Reputation pressure continued in parallel, with Shell facing fresh allegations over Niger Delta pollution and Exxon drawing criticism over shareholder rights and a new emissions reporting initiative that would remove scope 3 from disclosure, which Exxon frames as improving accuracy and critics call a way to shed responsibility.

Two dates now organise the rest of the year: mid-August, when Iran's toll-free window closes, and November, when the US midterms could reopen a confrontation both sides have paused rather than settled.

*Reputation Note*

Big Oil lessons for Big Tech. Big Tech is starting to occupy the position oil and gas held for decades. This week's narrative talks about the EU moving to soften data centre climate rules after lobbying by Amazon and Microsoft, and about Amazon and Google posting record emissions, up 16% and 18%. There is a growing backlash, and it isn't only tied to energy and emissions but grows deeper than that. Much like with "Big Oil," the real discontent is perceived unfairness. Big Tech is understandably focused on winning the global AI race, but it should learn the lesson big oil learned the hard way: reputation, once set, is hard to change. The firms that get ahead of the reputation question now, with a fairness accusation audit and an energy and emissions story built for the long term, will shape their narrative and how they are perceived. The alternative will be to discover that set in public opposition is harder to move than isolated regulation.

The Gulf Crisis Timeline

Tuesday, June 30

• Nigeria's biggest refinery imports UAE crude for first time, traders say (Reuters)

• Hormuz Traffic Picks Up as Supertankers Sail Into Persian Gulf (Bloomberg)

Wednesday, July 1

• Middle East oil transit, production resumes faster than expected (Axios)

• US, Iran talks conclude in Doha, focused on Strait of Hormuz (Reuters)

• Iran insists on keeping control over Hormuz, senior Iranian sources say (Reuters)

Thursday, July 2

• Saudi Aramco ramps up exports from Ras Tanura, switches to spot sales, sources say (Reuters)

• Iran’s Floating Oil Stockpile Swells as Major Buyers Stay Away (Bloomberg)

Friday, July 3

• Hormuz transits increase as US-Iran ceasefire holds (Financial Times)

• The Race to Rescue 8,000 Sailors Still Stranded Behind Hormuz (Bloomberg)

• Qatar LNG Ship Traffic Through Hormuz Resumes After Brief Pause (Bloomberg)

Narratives Outside the Gulf

AI and Energy Demand

• China Says Tech Growth a Challenge to Predicting Energy Demand (Bloomberg, June 29)

• Bloom Energy, Brookfield expand AI infrastructure power partnership to $25 billion (Reuters, June 30)

• Google's AI boom sends emissions, power use soaring (Axios, June 30)

• Amazon's AI expansion drives emissions to record high (Axios, July 1)

• EU weighs weaker data centre climate rules in win for Big Tech (Financial Times, July 2)

Capital

• Update on the World Bank Group Climate Change Action Plan (worldbank.org, June 29)

Electricity

• New York Power Prices Skyrocket as Heat Burdens US Grids (Bloomberg, July 1)

• US clean power prices set to soar as AI demand coincides with subsidy cuts (Financial Times, July 4)

• Octopus Energy set for showdown with workers over union recognition (Financial Times, July 5)

Energy Security

• Europe risks starting winter with gas stocks at 15-year low (Financial Times, June 29)

• The next Iran war may come sooner than you think (Reuters, July 1)

Gas and LNG

• Shell Sees LNG Trade Flat in 2026 as Hormuz Chokes Supply (Bloomberg, June 30)

• The town that Elon Musk built (Financial Times, July 1)

Industry

• EU must choose which sectors to protect or face exodus, warns Covestro chief (Financial Times, June 30)

Macro

• ECB’s Lane Sees Second-Round Effects Taking Time to Appear (Bloomberg, June 30)

• Energy profits lift Europe earnings outlook (Reuters, July 2)

Methane Emissions

• US Democrats urge Brussels to stick to methane rules (Euronews, July 3)

New Map

• Argentina angered by prospect of oil boom in Falklands (Financial Times, July 2)

• Canada unveils plans for new oil pipeline to break dependence on US (Financial Times, July 3)

Oil

• Goldman Flags Up Oil Surplus Even as Nations Rebuild Stockpiles (Bloomberg, July 1)

• Oil gains on short-covering buys ahead of US holiday (Reuters, July 2)

• China’s Private Refiners Snap Up Middle East Oil as Prices Slide (Bloomberg, July 2)

• Why the ‘oil price’ isn’t always the oil price (Financial Times, July 3)

• Brent could fall to $60 a barrel by Christmas, forecasts Citi (Financial Times, July 3)

• Oil market opens up as retail traders pour in (Financial Times, July 5)

Public Opinion and Reputation

• Shell alleged to have misled UK courts in Nigeria pollution case (Financial Times, July 3)

• The King of Big Oil (Financial Times, July 3)

Russia

• Putin's diesel export ban risks new fuel shock (Reuters, July 1)

• Russian fuel crisis prompts rush for Chinese electric cars (Reuters, July 2)

Transition

• Doomsday Climate Scenarios Were Wrong. That Doesn’t Help Europe. (foreignpolicy.com, June 30)

• Air Products Cancels Massive Clean Energy Complex in Louisiana (Bloomberg, June 30)

• The Hydrogen Economy Is Down But Not Out (Bloomberg, June 30)

• US fossil fuel power spending to beat China for the first time in decades (Financial Times, July 1)

• Trump biofuel goals hit reality as US plants lag (Reuters, July 2)

• Five charts that explain the energy world right now (Reuters, July 2)

• CATL Says Mining, Not Refining, Is Battery Making’s Big Hurdle (Bloomberg, July 2)

• China’s Net Zero Strategy Relies on an Unlikely Tool: Lots of Coal (Bloomberg, July 3)

Other Stories

• Eni and Mercuria to form partnership to trade energy commodities (Financial Times, June 30)

• Top investors oppose £5.7bn private equity bid for energy group DCC (Financial Times, July 3)

Sources: Axios, Bloomberg, Euronews, Financial Times, foreignpolicy.com, Reuters, worldbank.org

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