Energy bills for a typical UK household will rise by £221 to £1,862 per year from July 1, 2026, as the new Ofgem price cap takes effect. The 13% increase is driven by US-Israeli strikes on Iran and the closure of the Strait of Hormuz, which have sent wholesale gas prices soaring. Despite a ceasefire signed in June, experts warn that prices will remain high for the foreseeable future.
Ceasefire Offers Little Relief
Simon Francis, coordinator of the End Fuel Poverty Coalition, said the pause in fighting between the US and Iran will not lead to a quick drop in energy prices. "Cornwall Insight's forecast of a small fall in October offers little comfort. It is also entirely predicated on a fragile ceasefire with households remaining exposed to the volatility of fossil fuel prices, while the energy industry continues to profit," he said.
Cornwall Insight, a respected energy data analysis company, predicts just a 0.5% drop in the October price cap compared to July. The October cap is forecast to be £1,849 per year under the current methodology, or £1,654 under Ofgem's updated definition of a typical consumer, which reflects lower household energy use.
Geopolitical Uncertainty Keeps Prices High
A spokesperson for Cornwall Insight said: "Our forecasts have eased slightly since May, with the US-Iran 60-day ceasefire, along with ongoing negotiations, helping to stabilise wholesale gas markets. However, conflicting reports on the reopening of the Strait of Hormuz, the patchy progress of peace talks, and uncertain repair timelines to key regional infrastructure mean prices remain high, if less volatile than in the Spring."
The spokesperson added that elevated wholesale prices seen in May and parts of June will already be locked in for the October cap, meaning prices are unlikely to fall to levels seen in the first three months of 2026. The scale of any increase will depend on how long the geopolitical uncertainty continues.
Winter Bills Expected to Stay Above Pre-Crisis Levels
Cornwall Insight warned that even January's price cap is forecast to be higher than before hostilities started in the Middle East. "While July's higher prices will be cushioned by warmer weather and lower household energy use, the October cap lands as people switch their heating back on and will have a greater impact on household finances," the spokesperson said.
The government has several options to support households, and the new Prime Minister may introduce targeted support for vulnerable households if prices remain high. However, Simon Francis stressed that the only way to achieve cheaper bills is a mix of renewable energy and more efficient homes.
Call for Long-Term Solutions
Francis criticised the idea of new North Sea licences as a solution, noting that around 90% of commercially viable North Sea gas has already been extracted, and what remains is sold at global market prices. "The only credible path off the gas price rollercoaster is homegrown renewables, better energy efficiency for buildings and accessible heat pumps for every household," he said.
He urged the government to act before September, calling for a permanent social tariff, an end to energy debt, and a credible plan to bring down electricity prices. "The next Prime Minister inherits that same urgency," he added.
