Energy bills forecast to soar by £160 in July as Iran-US war drives up gas prices | Personal Finance | Finance
Household energy bills are forecast to rise by 10% from July following sharp increases in wholesale gas prices driven by the escalating conflict in the Middle East, experts have warned.
Analyst Cornwall Insight said forecasts for Ofgem’s price cap for July to September had surged to £1,801 a year for a typical dual fuel household with average use – an increase of £160 or 10% on April’s cap announced last week. Cornwall said the rise was a “cause for concern” and warned any increase would also feed through to electricity prices. However, it said the final price cap would be based on average wholesale prices over a three-month period, meaning it would depend on how long gas prices remained elevated and how long the volatility persisted.
Wholesale markets have climbed amid heightened regional tensions in the Middle East.
Following US and Israeli missile strikes on Iran, retaliatory attacks from Iran damaged oil and gas infrastructure across key Gulf states.
QatarEnergy has been forced to pause production of liquified natural gas (LNG) at several sites hit during Iran’s response.
Iran has also warned ships not to use the Strait of Hormuz, a vital shipping route for about 20% of global oil and gas, adding further pressure to global energy markets.
Although Europe and the UK do not rely heavily on Qatari LNG, reduced supply will affect major Asian importers such as Japan, South Korea and Pakistan, meaning competition in the global market is expected to intensify, pushing prices up.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “Looking at the April cap, the role of wholesale prices as a determinant of bills had eased given the impacts of policy costs and network costs.
“However, this latest forecast puts the role of wholesale markets firmly back in the spotlight and illustrates how exposed UK households remain to international market movements.
“While the rise is eye-catching, any immediate concern should be tempered. We are still early in the assessment period for the July cap, and what happens in the energy markets over the next three months will be the key factor, rather than this spike alone.
“Events like this reinforce the case for greater home-grown renewable generation. Reducing the UK’s reliance on volatile global gas markets is the most durable way to protect households from future price shocks.”
On Tuesday, money expet Martin Lewis urged households not currently on a fixed deal to secure a fix as soon as possible as prices are already rising, and the cheapest fixes which undercut the upcoming price cap are starting to get pulled off the market.
Martin said: “Planning to imminently FIX your energy bill? Don’t dawdle. Firms are repricing upwards today & tomorrow on back of Iran. Cheapest still 14% under Price Cap but I doubt for long (it may rebound, but in v short term they’re up).”
He added: “The wholesale gas rate is spiking due to the Iran conflict, and it is a prime driver or UK elec prices. If that’s sustained (big if), it will likely push the Price Cap rate up from July – Some of the cheap fixes from before the weekend haven’t (yet) been pulled, so you can still lock in a rate at around 14% less than the current Price Cap, both saving you money and giving peace of mind that the rate can’t rise.”
Sam Coyne, CEO Europe at Currenxie, told the Express: “Rising oil prices might grab the headlines but escalation across the Middle East will result in price hikes across all industry supply chains. The crippling of key trade routes will prolong uncertainty and continue to drive up supply costs, squeezing merchant margins ever further and ultimately leading to a spike in the cost of consumer goods and surging inflation.
“Recent research from the Chartered Institute of Procurement and Supply (CIPS) recently warned that due to rising costs of transport, energy and raw materials, consumer goods prices could soar during 2026. The events over the weekend are likely to make such forecasts inevitable and global businesses and consumers will rightly be hugely concerned of the longer-term impact on supply chain costs and the price of products on the shelves.”
