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- UK energy bills are due to drop by 7% in April 2026
- Analysts warn household energy bills could surge to £2,500 annually if conflict continues
- Crisis shows the UK is still far too dependent on gas
- Renewable energy can help cushion the blow of a gas crisis
Household energy bills could leap to £2,500 a year thanks to ballooning wholesale prices caused by the conflict between the US-Israel and Iran and the closing of the Strait of Hormuz.
The prediction comes from London-based financial investment firm Stifel, and if it is correct it would be the highest the energy price cap has been since October 2022, when prices were reeling from the Russia-Ukraine war.
The cost of UK natural gas has increased by 36% at the time of writing since fighting began on 28 February after QatarEnergy, one of the world’s biggest liquified natural gas (LNG) exporters, stopped production after one of its facilities was hit by an Iranian drone on Sunday.
This matters because UK energy prices are extremely vulnerable to spikes in the international price of wholesale gas, mainly because of its limited storage capacity and over-reliance on imports.
Iran’s decision to close the Strait of Hormuz, one of the world’s most important shipping waterways and a vital route for oil and gas. Around 20% of the world’s oil and gas passes through the Strait of Hormuz.
Since the US-Israel began striking Iran on 28 February, ships moving in and out of the region have come to a standstill, with one Iranian official quoted saying that the country will “set fire to anyone who tries to pass through” the Strait of Hormuz.
Combined with numerous Iranian attacks on other major energy exporters, such as the UAE and Saudi Arabia, international energy prices are unlikely to come down any time soon and could even increase further.
Saul Kavonic, head of energy research at MST Marquee, said that energy prices should stabilise once the Strait of Hormuz, but at the time of writing there is no sign of that happening.
Sanne Manders, president of logistics technology platform Flexport, said that the Strait of Hormuz is “ effectively closed,” partially because carriers aren’t willing to take the risk, but also due to “insurance companies not being willing to insure this risk anymore.”
What does this mean for energy bills?
The conflict means energy bills are likely to shoot up because the UK is extremely vulnerable to international gas prices. Even the price of electricity is dependent on it because it is generated at gas-powered plants.
Energy regulator Ofgem recently announced that the energy price cap would be £1,641 a year from April 2026, a drop of 7% from its current level. The situation raises very serious questions about the UK’s energy capacity and its exposure to international crises.
Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves are under pressure to prepare an emergency plan to deal with a shock increase.
Graeme Downie, a member of the Commons’ energy select committee, said poorer households will likely be hurt the most.
“The government is already making important improvements in energy infrastructure to increase resilience and we have seen signs of acceleration to increase defence spending much faster as well,” Downie said.
“On both issues, the prime minister and the chancellor need to take urgent steps to protect our country from external flux.”
Jess Ralston, head of energy at the Energy and Climate Intelligence Unit (ECIU) said the crisis remains too heavily dependent on gas, which is set by international markets beyond the government’s control.
“If the UK is to shield itself from this kind of volatility, it’s critical we switch to electric heat pumps rather than gas boilers to heat homes and further boost British renewables to power our houses and businesses,” Ralston said.
Alasdair Locke, chairman of Motor Fuel Group, the UK’s largest independent forecourt operator, said that the UK is likely to see higher fuel prices if the cost of oil remains high.
“With the price of oil going up, that is inevitably going to feed through in due course to higher prices at the pump,” Locke explained.
“It will depend on how long and how high those prices go as to how high the price of fuel will be.”
Renewable energy security
Ballooning wholesale gas prices shows how important it is to use renewable energy, such as solar, and to make sure your wallet is protected.
The war between Russia and Ukraine in 2022 is another example. Back then there was a huge jump of solar power in the EU, which helped soften the ensuing energy crisis.
Frauke Thies, Europe director at think tank Agora Energiewende, said that without renewables Europe would have been hit much harder by the energy crisis caused by the Russia-Ukraine war.
While crises like this might make clean energy a better option, higher energy prices could spark inflation, leading to raised interest rates from central banks, making it expensive to invest.
David Hostert, global head of economics and modeling at BloombergNEF, explained that it makes fossil-fuel disruption “a bit of a Rorschach test of what you want to see.”
“If you’re an oil and gas producing country, you might say ‘Oh this is the reason why we should fall back on our domestic resources.’ And for others it might be ‘Okay, this is why we should cut dependence on fossil-fuel imports and electrify our economy with renewables.’”
Many developing countries are investing in green energy solutions as they become cheaper and more accessible, but high oil and gas prices threaten to tighten government spending and limit funding of these clean technologies, which often rely on subsidies to compete with fuel alternatives. Also, in countries with plenty of coal, fossil fuel could be the easiest way to replace imported gas.
