Household energy bills in Great Britain could rise by £160 a year from July, pushing typical annual costs to £1,800, after the conflict in Iran sent UK gas prices to a three-year high. The warning comes from Cornwall Insight, an energy consultancy, which forecasts a 10% surge in household costs following a doubling of gas market prices after the US-Israeli attack on Iran. Tehran has retaliated by halting oil and gas shipments through the Strait of Hormuz.
The current price cap, set by Ofgem for April to July, stands at £1,641 a year, a £117 reduction from the previous quarter but less than the £150 cut promised by Chancellor Rachel Reeves. Ofgem will recalculate supplier costs for the next quarter, factoring in the recent market rise. Motorists are already facing higher fuel costs, with petrol up 2.5p per litre and diesel up over 3p since Saturday, as global oil prices exceed $81 a barrel.
Jonathan Brearley, Ofgem's chief executive, told MPs it is “genuinely too early to tell” how high bills may climb, depending on how long wholesale prices remain elevated. If the Strait of Hormuz—through which about 20% of global oil and seaborne gas shipments pass—stays closed, it would create “significant upward pressure” on bills. However, Brearley noted the UK is in a “significantly stronger position” than before the 2022 Russia-Ukraine crisis due to diverse gas sources.
Energy Secretary Ed Miliband said the government is monitoring the situation, adding that the conflict highlights the need to move away from fossil fuel dependence. He criticised Conservative leader Kemi Badenoch's claim that new North Sea licences could cut bills, noting her own shadow energy secretary admitted they would not. Reeves met North Sea bosses on Wednesday to discuss market upheaval, and a government source said she remains committed to ending the energy profits levy, though the Middle East crisis delayed any announcement.
Market experts warn the UK's reliance on gas imports and limited storage capacity leaves it more exposed to volatility than continental Europe. Andreas Schroeder of ICIS said abundant storage in central Europe acts as a buffer, whereas Britain relies on Norwegian pipeline gas and LNG imports. Tom Marzec-Manser of Wood Mackenzie noted the closure of Britain's last coal-fired power plants means it cannot switch to coal generation as some European countries can.
