Martin Lewis has announced that UK households can expect some positive developments regarding energy bills in the near future. The money-saving expert pointed to a significant drop in natural gas prices following a peace deal that ended the conflict between Iran, Israel, and the US. According to Mr Lewis, natural gas prices have fallen by almost 2 percent, while Brent crude oil prices have dropped by around 4-5 percent to approximately $82 per barrel.
Peace Deal Impact on Energy Markets
The agreement, reached on Sunday evening, includes an end to military actions and the reopening of the Strait of Hormuz, a crucial waterway for oil and gas shipments. This development has led to a decrease in wholesale energy prices, which directly influence UK household bills. However, Mr Lewis cautioned that despite this positive trend, the October price cap is still expected to increase unless further substantial drops occur.
Current Energy Price Cap Situation
Currently, around 60 percent of homes in England, Scotland, and Wales are on standard variable tariffs, meaning their energy costs are regulated by the price cap. The cap is set to rise by 13 percent on July 1, pushing typical annual bills to £1,862 for direct debit payers—an increase of £221. Before the conflict, the cap had been gradually falling, but the war and the closure of the Strait of Hormuz disrupted supply chains, causing prices to climb.
Mr Lewis noted that while the recent price drop is encouraging, wholesale prices remain significantly higher than pre-conflict levels. He stated, "The US and Iran signing a framework deal has pushed natural gas prices down. These wholesale prices are a key driver of UK gas and electricity bills. As the six-month graph shows, though, prices still have a long way to fall before returning to pre-conflict levels." He added that the good news could lead to slightly cheaper fixed tariffs being launched in the coming days, but without further substantial drops, the October price cap still looks likely to be significantly higher than today.
Broader Economic Implications
The peace deal is also expected to influence mortgage rates. Adam French, head of consumer finance at Moneyfactscompare.co.uk, commented, "While we are far from being out of the woods yet, a lasting peace deal should dramatically reduce the risk of the Bank of England’s worst-case scenario for inflation and interest rates becoming a reality." Under that scenario, base rates could have risen to 5.25 percent, potentially pushing typical mortgage rates towards 6.75 percent. Instead, Mr French believes mortgage rates, which have already been slowly falling, have likely passed their peak—at least until the next crisis. He advised borrowers to be optimistic but cautious, as inflation and economic data will continue to influence the outlook.
Despite the drop, oil prices remain well above pre-war levels of around $66 per barrel. The full impact of the peace deal on energy bills and the broader economy will become clearer in the coming weeks.
