Energy prices across Britain have spiked sharply in recent weeks following the outbreak of conflict in the Middle East. If you've seen alarming headlines about gas and electricity costs, here is a clear, factual explanation of what is happening, why the UK is affected, and what it means for your bills.
On 28 February 2026, the United States and Israel launched joint missile strikes against Iran. Missile strikes sent by Iran in retaliation hit many countries across the Middle East. Oneutilitybill While the human consequences of this conflict are rightly the primary concern, the impact on global energy markets has been immediate and severe.
In June 2025, Israel and Iran had already fought a 12-day war, during which prices spiked around 18% on fears about the Strait of Hormuz, then fell back once fighting stopped. Smart-energy This time, analysts and market participants warn the situation is different — and the price moves so far bear that out.
This is the question most people ask first, and it's a fair one. The UK is a long way from the Middle East. Here's the chain of cause and effect:
Step 1: The Strait of Hormuz
To export LNG around the world, tankers travel through the Strait of Hormuz, a narrow passage of water between the Gulf of Oman and the Persian Gulf. This passage is now essentially closed to all shipping traffic after warnings from Iran, and vessels choosing this route have been attacked. Oneutilitybill
Roughly 20% of the world's oil and gas usually passes through this waterway, so millions of barrels have been barred from entering the global supply chain. Octopus Energy
Step 2: Qatar halts LNG exports
QatarEnergy formally declared force majeure on Ras Laffan LNG, with reports suggesting a restart is weeks away, not days. Smart-energy Qatar is one of the world's biggest LNG exporters, and this single event removed a significant chunk of global supply almost overnight.
Step 3: Global gas prices surge
The price of European natural gas rose 67% in early March — the highest weekly gain since 2022. Sunsave Gas wholesale prices hit levels not seen since 2023, up 36% year-on-year, and the cost of heating oil surged 39% year-on-year. Endfuelpoverty
Step 4: Electricity prices follow
The wholesale cost of electricity has increased as well, because gas plants are one of the most common ways of producing electricity around the world — and the global price of energy directly affects UK prices. Sunsave
The numbers are stark. Within just one week of the conflict starting, April 2026 gas prices increased 52%, winter 2026 gas contract prices rose 25%, and day-ahead power prices rose 30% from £76/MWh to £99.25/MWh. Oneutilitybill
By mid-March, UK next-month gas was trading at 135.65p/therm, with summer 2026 power prices above winter 2026 — an unusual inversion reflecting acute near-term supply pressure. Smart-energy
For context, the Office for Budget Responsibility noted that oil prices are currently around 20% higher than before fighting escalated, and gas prices are up around 50%. The OBR estimates this could add approximately 1% to UK consumer prices by the end of the year. Fintel
However, it is worth keeping perspective. The current spike is significantly less severe than following Russia's invasion of Ukraine in 2022, when prices rose roughly fivefold and the government stepped in with an energy support package. Fintel
For most households, the answer is: not yet — but potentially from July.
Bills are effectively protected until at least 1 July 2026 because the April to June price cap has already been set. Endfuelpoverty The Ofgem energy price cap stands at £1,758 for the first quarter of 2026 and was expected to fall to £1,641 in the second quarter before the conflict escalated. BusinessRescueExpert
It will not be until Ofgem sets its next price cap from the beginning of July that most households feel the effects. Analysts at Cornwall Insight have forecast that household energy bills could rise by 10% from July after the sharp increases in wholesale gas prices. Fintel
For businesses, the situation is more immediate and more serious. There is no price cap on business energy rates, and energy suppliers have begun pulling fixed-price tariffs from the market due to extreme volatility. In just a matter of days, the number of available fixed tariffs plummeted from 38 down to 15, with the prices of remaining deals surging sharply. Major suppliers including British Gas, OVO, and Scottish Energy have withdrawn their fixed tariffs entirely. BusinessRescueExpert
The long-term fix is building more wind and solar, switching homes off gas boilers and onto heat pumps, and reforming the way the electricity market works so that clean, cheap power actually drives down people's bills. That's what gets Britain off the gas dependency that makes these crises so damaging. Octopus Energy
The uncomfortable truth is that even on a calm, windy day in Britain, electricity prices are partly set by gas. Because gas-fired power stations are often the last source of generation switched on to meet demand, they set the marginal price for the whole grid — meaning that even wind-generated electricity is effectively priced at the gas rate. Right now, even green electricity is priced according to gas costs, and because the grid can't always move power from where it's generated to where it's needed, the UK pays wind farms to turn off and gas plants to replace them. That wasted wind cost nearly £1.5 billion last year alone. Octopus Energy
UK electricity prices are currently around 92% higher than the EU average for medium-sized businesses, making the UK the most expensive country in the EU for electricity relative to gas. BusinessRescueExpert This structural vulnerability means global shocks hit British consumers harder than many of our European neighbours.
The National Institute of Economic and Social Research has modelled two scenarios. If the shock to oil and gas prices proves temporary, UK inflation would rise by around 0.3 percentage points in 2026. If the shock persists for a year, UK inflation could increase by approximately 0.7 percentage points, interest rates could rise by around 0.8 percentage points, and UK GDP could decrease by 0.2% in 2026. NIESR
Russia has also reportedly been sharing intelligence with Iran, and a Russian-flagged LNG tanker was sunk in the Mediterranean after a drone attack — adding a new dimension to the supply picture, with Putin suggesting Russia may reduce remaining gas supplies to Europe ahead of the planned 2027 phase-out. Smart-energy Markets remain extremely volatile, and the situation continues to develop.
If you're a household on a variable tariff: Consider whether a fixed deal makes sense. Fixing for 12 months at current rates means paying around the same as the energy price cap throughout 2025 — which may offer protection against further increases, though tariffs with exit fees require careful consideration. Octopus Energy
If you're a business: Act quickly. With fixed tariffs disappearing from the market, securing any available deal now is far preferable to falling onto an out-of-contract rate.
Longer term: The most effective hedge against wholesale energy market volatility is reducing your dependence on the grid altogether — through solar panels, home battery storage, and smart energy management. Every unit of electricity you generate and store yourself is a unit you're not buying at whatever the market price happens to be during a crisis.
At PowerBase.energy, we help households understand their energy options and reduce their exposure to exactly this kind of market shock. The Iran conflict is a reminder — like Ukraine before it — that Britain's reliance on imported fossil fuels carries a real and recurring cost. The faster we build a genuinely clean, domestic energy system, the more resilient we become.
Want to explore how solar and battery storage could protect your home from energy price volatility? Get in touch with the PowerBase.energy team today.