Energy Advisory — Update No. 5
The Friction Has Been Removed. The Implications Have Not Changed.
Two events in 36 hours last week changed the nature of this conflict more than any airstrike. The Army Chief of Staff was fired during active wartime and replaced with the Defense Secretary's former aide — a man who previously commanded the exact ground unit now en route to theater. Hours earlier, the Iranian official coordinating a Vance back-channel through Pakistan was struck at his home, his wife killed. Neither the diplomatic moderating mechanism nor the military institutional one exists in the same form today as it did a week ago. The analytical context — Iran monetizing Hormuz, the Pakistan intermediary, the Goldman 10-week clock — is unchanged. We are at week six. What changed is the friction that might have moderated the response.
Two events in 36 hours changed the decision architecture
Army Chief of Staff fired during active wartime — replaced with Hegseth's former aide. Defense Secretary Pete Hegseth fired Gen. Randy George, the Army's Chief of Staff, on April 2 — effective immediately. Firing a general during wartime is nearly without modern precedent. He also dismissed two additional Army generals the same day. The replacement acting chief is Gen. Christopher LaNeve, previously Hegseth's own military aide and former commanding general of the 82nd Airborne Division — the exact unit currently deploying to the Middle East as part of the ground operation force package. The Pentagon's stated rationale: Hegseth wants someone to "carry out the vision of this administration without fault." Hegseth has now fired the Chairman of the Joint Chiefs, the Chief of Naval Operations, the Air Force Vice Chief, the head of the Defense Intelligence Agency, and the Army Chief of Staff. The institutional architecture for generating friction in presidential military decision-making has been systematically dismantled.
Kamal Kharazi struck at his home — Pakistan back-channel disrupted. The day before the George firing, a joint US-Israeli airstrike hit the Tehran home of Kamal Kharazi — the 81-year-old former foreign minister and head of Iran's Strategic Council on Foreign Relations who was coordinating back-channel engagement with Pakistan for a possible meeting between Iranian officials and Vice President Vance. His wife was killed; Kharazi was hospitalized with severe injuries. The New York Times and Reuters confirmed Kharazi's diplomatic role in the Pakistan process. VP Vance had been in contact with Pakistani intermediaries as recently as the Tuesday before the strike. Iranian officials described the attack as a deliberate attempt to derail diplomacy. Whether targeted or collateral damage from an adjacent IRGC-linked site, the effect is the same: every Pakistani, Turkish, and Egyptian official involved in the back-channel watched Washington strike the man arranging their meetings.
Trump's primetime address and the April 6 deadline. Trump delivered a national address declaring US objectives "nearing completion" while simultaneously threatening to bomb Iran "back to the Stone Ages" over the next two to three weeks. He did not mention ground troops — neither ruled in nor ruled out. He told allied nations to "go take" the Strait of Hormuz themselves, framing Hormuz as their problem while retaining all military options. Iran called the 15-point US framework "unrealistic and unreasonable" and denied any direct talks are occurring.
Energy markets — Brent records its steepest monthly rise on record. Brent rose more than 55% in March — the steepest monthly gain on record. Brent has traded between $109 and $116 in the days since, with the paper market responding to diplomatic rhetoric while the physical market — Dubai crude at $126 — reflects that Hormuz remains effectively closed.
Days 34–38: F-15 shot down, Mahshahr struck, bridge targeting begins. On April 4, a US F-15E was shot down over Iran — the first US aircraft lost in thousands of sorties. Both crew members were recovered; the second required a special operations insertion inside Iranian territory on April 5. The Mahshahr petrochemical complex was struck on April 4, hitting facilities responsible for approximately 70% of Iran's domestic gasoline supply — a targeting doctrine shift from military infrastructure to civilian-adjacent economic assets. The B1 bridge in Karaj was separately destroyed; bridge targeting is a new strike category. Trump's April 5 Truth Social post named Tuesday "Power Plant Day and Bridge Day."
Goldman clock: ~4 weeks to $147 threshold Goldman Sachs
Steepest monthly gain on record CNBC · Bloomberg
If Hormuz shut through end of June Macquarie · March 28
New deadline: Tuesday 8PM ET Trump · Truth Social
Update — publishing morning, April 6The April 6 8PM ET deadline was extended a third time — Trump posted a new deadline of Tuesday 8PM ET. Axios reported overnight that US, Iranian and regional mediators are actively discussing a 45-day ceasefire framework that could lead to permanent settlement negotiations. Four US, Israeli and regional sources confirmed the talks. Sources described the chance of a partial deal before Tuesday as slim, and made clear that Hormuz reopening and Iran's enriched uranium are not phase-one deliverables — they are reserved for the final deal. Iran confirmed it has formulated its response to ceasefire proposals but will not engage in direct talks while attacks continue. The 45-day framework, if reached, does not resolve the supply picture for NYC buildings. The analytical frame of this advisory is unchanged.
The decision architecture has changed. The analytical context has not.
The analytical context from Update No. 4 is confirmed and unchanged: Iran is monetizing Hormuz with a formal sovereignty claim its parliament is codifying into law; the Pakistan intermediary gap is documented and specific — Hormuz sovereignty recognition is a US-unmeetable precondition; the Goldman clock is at week six with no sign of resolution. What changed is not that context. What changed is what stood between it and its worst-case implications.
The military force package in theater: two Marine Expeditionary Units (31st and 11th MEU) totalling approximately 4,500 Marines, the 82nd Airborne deploying, over 50,000 US troops in the Middle East. The 82nd's former commander now runs the Army. The 31st MEU's Tripoli and the 11th MEU's Boxer are the amphibious platforms from which a Kharg Island operation would be mounted. This is not a coincidence of scheduling. It is a coherent force package for a discrete, time-limited ground operation — exactly what multiple analysts described as the planning objective.
"The Army chief was fired for the same reason the back-channel figure was struck. Both were mechanisms capable of moderating the distance between instinct and action. Neither is functioning as it was."
How Ras Laffan's confirmed structural damage — and a closed strait — reach your utility bill
The pathway from Gulf events to NYC utility bills operates through three compounding mechanisms. The oil mechanism drives heating oil and winter fuel budgets. The gas mechanism drives Zone J electricity and delivered gas bills. And now, physical damage to the production infrastructure that supplies global LNG markets — not just the shipping lane that moves it — imposes a third, longer-duration constraint. QatarEnergy's confirmation of up to five years to repair converts what previous advisories described as a conflict-duration risk into a structural infrastructure risk. The gas and electricity exposure does not end when the strikes cease.
Gas prices set Zone J wholesale electricity. Historical data quantifies the transmission precisely.
NYC commercial buildings pay a blended all-in rate of roughly $0.27–0.30/kWh today. That bill divides into a stable regulated delivery component (~$0.14–0.16/kWh) and a supply component (~$0.12–0.14/kWh) that tracks NYISO Zone J day-ahead prices. Zone J clears at the marginal cost of the last unit dispatched. During peak summer hours, that unit is a gas peaker operating at 10–14 MMBtu/MWh heat rate — every $1/MMBtu move in delivered NYC gas moves the Zone J clearing price by $10–14/MWh at that hour.
Two historical data pairs anchor the estimate. Summer 2022 vs. summer 2023 (S&P Global): Zone J on-peak summer strip moved from $123.79/MWh to $55.97/MWh as Transco Z6 NY gas moved from $7.64 to ~$2.00/MMBtu — an empirical scalar of $12/MWh per $1/MMBtu across summer peak hours. January 2023 vs. January 2024: Zone J moved from $212.09/MWh to $96.41/MWh as gas moved from $15.83 to $7.26/MMBtu — a scalar of $13.50/MWh per $1/MMBtu in winter peak. For the all-in commercial retail bill, the 2022 Russia-Ukraine year provides the cleanest macro anchor: Algonquin Citygate averaged $9.15/MMBtu, Zone J all-in bills rose ~80%, implying a blended retail scalar of $0.03–0.04/kWh per $1/MMBtu of delivered gas across all hours including nights and weekends.
Applying those validated scalars to current conditions: with Algonquin basis projected at $8–12/MMBtu in winter 2026/27 (the Russia-Ukraine annual average becoming a winter floor condition, not a summer one — Algonquin summer forward is currently $2.94/MMBtu), the winter all-in blended rate moves toward $0.44–0.55/kWh. Summer electricity rates in 2026 will be modest — Algonquin summer forward is currently $2.94/MMBtu, producing minimal summer electricity variance. The significant exposure is winter 2026/27, where cold-event peak hours could reach $0.75–1.00/kWh — consistent with the 2014 Polar Vortex conditions when Algonquin hit $120/MMBtu. A building consuming 1.5 million kWh annually faces 35–75% above baseline for the winter billing period under Scenario C. That range carries no LNG import relief mechanism — the historical events that constrained winter peaks within weeks are no longer available.
Ras Laffan's repair floor confirmed at up to five years. The Northeast import safety valve is gone on three compounding levels — and the Houthis contesting Bab al-Mandab adds a fourth constraint on top of an already-closed system.
NYC buildings pay Henry Hub plus the Algonquin Citygate basis differential — the pipeline premium into the constrained New York City system. In normal conditions: $1–3/MMBtu. Under cold weather or tight supply: $5–10/MMBtu. During Winter Storm Fern (January 2026): above $30/MMBtu with Zone J real-time prices exceeding $200/MWh. The historical mechanism that kept extreme basis events short-lived was Northeast LNG import terminals — Everett MA and Canaport NB — which would activate when pipelines tightened, supplementing supply and compressing basis spikes within days.
That safety valve is gone on three compounding levels. First, it became commercially unviable when global LNG spot exceeded $20/MMBtu — JKM, the Asian spot benchmark, is currently at $19.83/MMBtu and was already at $20+ through most of March. Second, QatarEnergy confirmed 17% of Qatar's LNG export capacity offline with repairs taking up to five years — meaning no Ras Laffan cargo exists to divert at any price. Third, Bab al-Mandab was never a viable rerouting channel for US Northeast LNG imports at commercial scale; the Houthis contesting it adds further constraint on an already-closed system but is not the primary reason the safety valve is gone.
The 2022 Russia-Ukraine precedent — the closest analog — had a functioning safety valve. The current scenario has none. All-in delivered NYC gas: $8.00–12.00/MMBtu baseline through summer, with peak winter 2026/27 days potentially reaching $20–35/MMBtu in a cold event. A building consuming 50,000 MMBtu/year faces a 60–100%+ increase in annual gas costs against pre-conflict baselines under extended Scenario C conditions.
The July procurement decision now occurs against Brent ~$110, Kuwait refining capacity offline, and a live Scenario D trigger.
Heating season ends mid-April. Current-year exposure remains modest. The real decision is fall procurement — typically 60,000–80,000 gallons for a New York commercial building, now facing delivered prices tracking above $6.00–6.25/gallon against a pre-conflict baseline of ~$4.40–4.55. Each $1.00/gallon change carries a $60,000–80,000 budget impact at those volumes.
The July review date remains the right framework. But the context has hardened further since our last update. Kuwait's Mina Al-Ahmadi refinery — 730,000 bpd capacity — was struck by Iranian drones this week, adding to the 3+ mb/d of Gulf refining already offline. Distillate supply is tighter than any previous advisory's oil model assumed. Central case for July review: $6.00–6.50/gallon delivered. Contingency if Scenario D activates: $7.50+/gallon. Do not lock in forward contracts at elevated prices while oil infrastructure targeting on both sides remains active.
Steam customers carry the same gas exposure with a billing lag — and absorption chiller buildings face maximum compounding.
Con Edison's steam system purchases natural gas and passes costs through its Gas Adjustment Charge with a one-to-two billing cycle lag. Buildings on steam for heat and domestic hot water face the same Henry Hub and Algonquin basis exposure described above, flowing through in May and June bills rather than April.
Absorption chiller buildings — common in older Manhattan high-rises — are the most exposed building type in this advisory. Steam costs rise in summer precisely when cooling loads are highest, and the gas transmission mechanism means both steam and electricity costs hit simultaneously under the same Algonquin basis move. Under validated Scenario C pricing, an absorption chiller building's total summer energy variance — electricity plus steam combined — is the largest of any building type we model. If your building uses absorption cooling, this warrants explicit board discussion before April billing begins.
Scenario C is the floor — Scenario D's moderating mechanisms have been removed
GES does not forecast geopolitical outcomes. The scenario structure below draws from Goldman Sachs, JPMorgan, Barclays, Deutsche Bank, Oxford Economics, Morgan Stanley, Kpler, and Macquarie, updated through Day 38 market conditions. The material change from our previous scenario table: Scenario D no longer requires a specific triggering event. The institutional mechanisms that historically moderated the decision path toward a ground operation have been removed. That does not mean escalation is certain — it means the friction has been reduced.
Flows restore
near term
STRUCTURALLY
BLOCKED
Henry Hub: $3.50–4.00+10–15% annual energy bill Citi · GS
Flows constrained
through April–May
SUPERSEDED —
MARKET MOVED
THROUGH THIS
Henry Hub: $4.50–5.50+20–30% annual energy bill GS · JPM · Barc
Extended disruption +
confirmed infrastructure
damage
CONFIRMED PRESENT —
PLANNING FLOOR
Henry Hub: $8.00–12.00++45–75%+ annual energy bill Barc · Kpler · GS · CNBC
Power plant strikes +
full infrastructure
war
MODERATING
MECHANISMS
REMOVED
Henry Hub: $15.00–35.00++75–150%+ annual energy bill Deutsche Bank · Oxford Econ. · Macquarie
Macquarie (March 28): 40% probability Brent reaches $200 if Hormuz stays shut through end of June. Equivalent to US gasoline at $7/gallon.
Deadline extended to Tuesday 8PM ET — see update callout above for full ceasefire framework detail. The force package in theater is unchanged. The Goldman clock is at week six regardless of the deadline outcome. A ceasefire announcement would move Brent paper sharply downward; physical prices and Algonquin basis move more slowly and less completely — Ras Laffan's damage is structural and survives any ceasefire intact.
Iran's active threat list — four facilities still named. Iran has not withdrawn its evacuation warnings for Saudi SAMREF (400K bpd refinery), Jubail petrochemical complex, UAE Al Hosn gas field, and Qatar Mesaieed complex. Saudi Aramco evacuated SAMREF personnel. These are not rhetorical designations — Ras Laffan appeared on a similar warning and was struck within hours. If any of these four facilities are hit, the disruption expands beyond Ras Laffan's 20% of global LNG supply into GCC refining capacity. That is the condition where Scenario D price ranges apply to gas and electricity directly, not just to oil, and simultaneously.
The four variables that determine your exposure
The scenario ranges below are built around a 150–200 unit building consuming approximately 1.5 million kWh annually and 50,000 MMBtu of natural gas. Your building's actual exposure depends on four variables. The difference between a well-positioned building and a poorly-positioned one under current conditions can exceed $150,000 — and it comes entirely from contract structure and procurement timing, not from anything about the geopolitical outcome.
Variable rate or Con Ed default gas supply: Fully exposed to Algonquin Citygate daily pricing. Under current conditions, delivered NYC gas has a wide intraday range. April and May bills will be the first direct measurement of your exposure. Do not assume Henry Hub headlines reflect your actual bill — NYC pays Henry Hub plus a local pipeline premium that is its own separate risk.
Variable rate or Con Ed default supply: Fully exposed to NYISO Zone J spot prices. Historical data validates a $10–14/MWh Zone J movement per $1/MMBtu of delivered gas at summer peak hours (S&P Global 2022/2023 summer comparison; NYISO State of the Market). With Algonquin basis structurally elevated and no LNG import safety valve available, the supply rate differential under Scenario C is approximately $0.18–0.27/kWh above today's baseline at summer peak.
Oil heat: Heating season is ending. The July procurement decision now occurs against Brent ~$110, Kuwait refining capacity offline, and active oil infrastructure targeting on both sides. Budget for delivered oil at $6.00–6.50/gallon as a central case; establish contingency to $7.50+ for Scenario D. Each $1.00/gallon above pre-conflict baseline costs $60–80K per season at typical NYC commercial volumes.
Con Ed steam: Exposed via Gas Adjustment Charge with a 1–2 cycle lag. Absorption chiller buildings face compounding summer exposure — steam and electricity rising together under the same gas mechanism, at peak cooling loads simultaneously.
The board question is now: Can your current reserves absorb a 45–75% energy cost increase without a special assessment? If yes: monitor and plan. If no: the board needs to know before the first elevated summer bills arrive in approximately five weeks.
What to do now — and what to watch to know if anything is changing
The actions below have positive expected value across all scenarios and do not require a view on conflict duration or geopolitical outcome.
- Pull every energy supply contract and confirm all renewal dates — especially gas. Fixed contracts are the primary protection against current conditions. Any contract renewing in Q2 or Q3 2026 faces a forward curve built on 38 days of confirmed disruption, Brent up 55%+ from pre-war levels, Ras Laffan 17% offline on a confirmed multi-year repair, the Army institutional voice against a ground operation removed, and a Goldman-defined escalation clock now at week six of ten. Suppliers have every incentive to let variable contracts lapse to spot. Identify renewal dates before your supplier does — and check both commodity supply terms and any demand response or curtailment provisions affecting peak load flexibility.
- Confirm your rate structure on both electricity and gas. Some buildings are on variable rates without knowing it. April bills are the first direct measurement of conflict exposure. Run the Scenario C math against your consumption now: delivered gas at $10–12/MMBtu, blended electricity at $0.44–0.55/kWh. That is the central planning range, not a stress case. The ability to act narrows once the invoice has arrived.
- For oil buildings: revise the budget baseline to $6.00–6.50/gallon delivered; establish contingency at $7.50+. The July review remains the right procurement timing. Do not lock in at currently elevated prices while infrastructure targeting on both sides is active — Kuwait refining capacity just came offline, and SAMREF and Al Hosn remain on Iran's active threat list. The July decision will be better-informed than any lock-in today.
- Have the reserve conversation with the board before June. First elevated summer bills arrive in approximately five weeks. For a fully-exposed building, Scenario C represents a 45–75%+ increase above pre-conflict energy costs. Frame it concretely: here is our current energy spend, here is the range of increase, here is the point that triggers a special assessment. The confirmed Ras Laffan repair floor means this is not a question that ages out when the conflict does — it is structural.
- For absorption chiller buildings: schedule a dedicated summer energy review this week. Steam and electricity rising simultaneously through the same Algonquin basis mechanism at peak cooling loads is the highest-exposure condition we model. Under Scenario C pricing, the combined summer variance for an absorption chiller building exceeds every other building type. This warrants a specific board line item, not a general advisory note.
Leading indicators — current status as of Day 38
The indicator set has been substantially revised from Update No. 4. The set below reflects what to watch in the week ahead.
"The Army chief was fired for the same reason the back-channel figure was struck. Both were mechanisms capable of moderating the distance between instinct and action. The analytical implications are the same whether the motive was deliberate or incidental."