Martin Lewis has warned that the October energy price cap is likely to be 'far higher' than the current level, despite the recent US-Iran deal that ended hostilities. The money-saving expert explained that while some 'slightly cheaper' fixed tariffs could appear soon, a dramatic fall in the price cap is probably misplaced.
Why the Price Cap Won't Drop Immediately
Mr Lewis noted that the end of hostilities between the US and Israel could lead to lower fixed tariffs in the coming days due to falling natural gas prices and the reopening of the Strait of Hormuz. However, he cautioned that prices have 'a long way to fall before returning to pre-conflict levels'.
Time-Lagged Pricing
Responding to a social media query, Mr Lewis explained that the energy price cap is time-lagged, meaning it is slow to rise and slow to fall. The assessment periods for the caps are: April cap based on November 18, 2025 to February 17, 2026; July cap based on February 18, 2026 to May 18, 2026; and October cap based on May 19, 2026 to August 18, 2026.
The user questioned why the July cap would not be higher, given that the assessment period includes months when prices were high. Mr Lewis clarified that the first month of the April cap was not affected by the Middle East conflict, but the last two months were. Since the October assessment period, prices have been very high and are already 'banked in'. He added that the key is how much prices drop now, but October is likely to be far higher than April.
Impact of the Conflict
US and Israeli strikes on Iran began on February 28, 2026, causing oil and natural gas prices to skyrocket. In May, Ofgem announced a 13.5% increase in the July-September price cap, equating to £1,862 per year for average direct debit customers in England, Scotland, and Wales. This was a £221 increase from the previous cap, which had been falling as gas and oil prices gradually dropped.
The April 1 to June 30 cap, announced days before the bombing, went down by £117 (7%) for a typical household, saving about £10 a month.
Outlook for October
Despite the cessation of hostilities, the October price cap is expected to rise further unless there are major falls in natural gas prices, which appear unlikely at this early stage. While oil prices have fallen to around $80 a barrel, they remain considerably higher than the pre-war level of $66 per barrel.
