Global conflict rarely stays contained to borders. It moves through commodities, capital markets and supply chains — and energy is often one of the first sectors to react.

With escalating geopolitical tensions impacting key energy-producing regions, we are already seeing early signs of volatility returning to wholesale electricity and gas markets.

Importantly, we have seen this before.

The First Signal: Retailers Stepping Back

Several major retailers have already begun withdrawing market offers or stepping back from pricing new contracts. We saw this exact behaviour in 2022 during the energy crisis triggered by the Russia–Ukraine war.

It is a classic early warning signal in volatile conditions — when wholesale forward curves move rapidly, retailers limit exposure rather than attempt to price uncertainty.

When pricing confidence disappears:

• Fixed offers shorten
• Discounts narrow
• Acquisition campaigns pause
• Retailers protect balance sheets

Retailers do not withdraw from the market lightly. When they do, it typically reflects difficulty hedging forward wholesale exposure at predictable margins.

We have seen this movie before.

Why Global Conflict Impacts Australia

Even though Australia is geographically removed from many conflict zones, our energy markets are not isolated.

Australia is connected to global energy dynamics through:

• LNG export pricing and global gas benchmarks
• International coal markets
• Shipping and freight routes
• Currency volatility
• Investor risk sentiment

Energy is globally priced — even within the National Electricity Market (NEM). When global fuel markets tighten, local wholesale markets feel the impact quickly.

Why Some Regions May Be More Resilient

Not all Australian energy markets respond to volatility in the same way.

South Australia, for example, has one of the highest penetrations of renewable energy in the world, with wind and solar frequently supplying the majority of the state's electricity demand.

This high level of renewable generation can provide a level of insulation from global fossil fuel shocks, particularly when wind and solar output is strong. While South Australia remains connected to the broader National Electricity Market, its growing renewable base can soften exposure to international fuel price volatility compared with more thermal-dependent regions.

What Could Happen Next?

Higher Risk Premiums Flow Into Retail Pricing

Retailers hedge against future wholesale exposure. When forward curves move aggressively, hedging costs increase — and those costs are ultimately reflected in contract pricing.

This can lead to:

• Higher quoted rates
• More conservative contract structures
• Reduced appetite for long-term fixed pricing

DMO and VDO Pressure

The Default Market Offer (DMO) and Victorian Default Offer (VDO) are calculated using forward wholesale cost inputs.

If elevated wholesale futures persist into the regulatory assessment window, benchmark pricing may rise in subsequent determinations.

The DMO and VDO are safety nets — not competitive products — but in stressed markets they often become reference anchors for broader retail pricing. We saw this dynamic play out following the 2022 energy shock.

Reduced Competitive Tension

When retailers step back, competition softens. That can mean:

• Fewer market offers available
• Smaller discounts off benchmark pricing
• Less aggressive commercial negotiation

Liquidity matters in energy markets. When liquidity tightens, price discovery becomes more volatile.

Why Timing the Market Matters

Periods like this reinforce why timing energy procurement carefully is so important.

Energy Intelligence actively monitors wholesale market signals, retailer behaviour and forward pricing curves across the National Electricity Market. When conditions are favourable and retailers are actively competing, that is often the right time to test the market.

Conversely, when retailers begin withdrawing offers or stepping back from pricing risk, it can signal that the market is entering a more volatile phase.

This is why we sometimes recommend clients go to market earlier than expected — or wait until conditions stabilise. Timing procurement in a competitive market environment can materially influence the pricing outcomes achieved.

In energy markets, when you go to market can be just as important as who you go to.

A Measured Perspective

Energy markets are cyclical. Governments intervene when required. Regulators adjust frameworks. Retailers adapt.

However, one principle remains consistent: when uncertainty rises, risk premiums rise — and when risk premiums rise, prices follow.

Geopolitical instability compresses timelines and amplifies market reactions. Early signals — like retailers withdrawing offers — deserve attention.

We have seen this before. The question is not whether markets respond, but how sustained and how sharp that response becomes.