Just when households thought they were catching a break, global events have thrown the UK’s energy market into turmoil again. The escalating conflict in the Middle East, specifically the war with Iran, is causing seismic shifts in global energy supplies, and unfortunately for British consumers, fuel prices are soaring and the Energy Price Cap is forecast to rise this summer [1] [2].
At MoneyLad, we know that after years of volatility, another spike is the last thing anyone needs. Here’s a breakdown of what is happening, why it impacts your bills, and what the experts are predicting for the coming months.
The Strait of Hormuz: A Global Energy Chokepoint
To understand the price hike, you have to look at the Strait of Hormuz. This narrow waterway between Iran and Oman is a critical artery for global energy, through which about 21 million barrels of oil a day – equivalent to around 21% of global supply – and a fifth of global Liquefied Natural Gas (LNG) production passes [3] [4].
Recent retaliatory attacks in the region have brought tanker traffic through the Strait to a near standstill. By 2 March, vessel passages through Hormuz had decreased substantially, with only three tankers transiting on March 1 – an 86% drop from the 2026 daily average [5]. A senior adviser to Iran’s Revolutionary Guard stated that they “won’t allow a single drop of oil to leave the region,” spooking markets and disrupting logistics [6]. This isn’t just about oil; it’s about Qatari LNG exports – Qatar having declared force majeure on its gas production after drone attacks targeted facilities in Mesaieed and Ras Laffan [7].
The Immediate Impact at the Pump
For UK drivers, the effect has been immediate. The average price of diesel has surged to a 16-month high, hitting 148p per litre – a level not seen since mid-August 2024 – while petrol has risen to 137p per litre [8] [9]. The RAC reports that filling a typical 55-litre family car with diesel is now £3.30 more expensive than it was just last week, with petrol adding £2 to a tank [9].
But the bad news doesn’t stop at the forecourt. These wholesale costs filter through to every corner of the economy, from the cost of delivering food to the price of manufactured goods. The price of benchmark Brent crude increased 13% during early trading on 2 March, while European natural gas prices jumped 24% [2]. UK gas prices are currently more than 70% higher than the previous week [5].
What This Means for the Energy Price Cap
This is the part that will hit household budgets the hardest. While the latest energy price cap dropped to £1,641 in April – a £117 reduction from the previous period – providing a sliver of relief, analysts are warning that this relief will be short-lived [10].
Leading energy analysts Cornwall Insight have issued a stark forecast: the Price Cap is expected to rise by about 10% in July, reaching £1,801 for a typical household [1] [2].
Why? Because the Price Cap is heavily influenced by wholesale energy prices. The current crisis has caused wholesale prices to surge. While the UK doesn’t rely directly on Middle Eastern pipelines, we compete in a global market for LNG. If Asia and Europe are both scrambling to replace disrupted Qatari and Gulf supplies, prices go up for everyone. Cornwall Insight noted that reduced supply will increase competition and the UK “may need to raise prices to compete for these cargoes.” [1] Craig Lowrey, principal consultant at Cornwall Insight, stated: “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” [1].
| Period | Ofgem Price Cap (Typical Use) | Change |
|---|---|---|
| April 2026 | £1,641 | – |
| July 2026 (Forecast) | £1,801 | +£160 (10%) |
Could It Get Worse?
The situation is fluid, and worse-case scenarios are on the table. If the Strait of Hormuz remains closed for an extended period, oil producers in the region will run out of storage space and be forced to halt production entirely. There are already reports of Iraq beginning to shut down operations. Iraq has halted production at the Rumaila oil field, one of the world’s largest, after export disruption through the Strait of Hormuz raised concerns over limited storage capacity [11]. The field accounts for roughly one-third of Iraq’s crude output [11].
Analysts at JP Morgan warn that “the market is shifting from pricing pure geopolitical risk to grappling with tangible operational disruption, as refinery shutdowns and export constraints begin to impair crude processing and regional supply flows.” They estimate that if the conflict lasts more than three weeks, Gulf oil producers would exhaust storage capacity and be forced to shut in production, potentially pushing Brent crude into the $100-$120 range [12]. Some experts warn that a prolonged conflict could cause permanent damage to oil fields, making it harder to restore supply even after the conflict ends. Neuberger Berman analysts note that history offers uncomfortable precedents: Libya produced 1.7 million barrels per day before its 2011 intervention, but output collapsed to almost nothing and has never fully recovered [12].
A Double Blow for the UK Economy
This energy shock comes at a fragile time. The National Institute of Economic and Social Research (NIESR) warns that if high energy prices persist, it could force the Bank of England to reconsider interest rates. In a prolonged crisis scenario – where energy price hikes last a full year – UK interest rates could climb back above 4% to combat rising inflation, squeezing mortgage holders just as they hoped the worst was over [13].
NIESR economist Ed Cornforth explained that if the energy price shock persists for a full year, UK inflation could be pushed 0.7 percentage points higher, and interest rates might need to rise by about 0.8 percentage points, with the economy contracting by about 0.2% in 2026 [13].
One London resident interviewed this week summed up the mood of many: “My energy bills have gone up two or three hundred pounds each year just to stay warm. It feels like we’re always the ones paying for these crises” [9]. Another added, “I’m not an economist, but I know one thing – oil affects everything, because everything relies on transport” [9].
What Can You Do?
While we can’t control geopolitics, we can control how we prepare. With the July price hike looming, now is the time to act before the colder months return.
- Submit Meter Readings: Before the new Price Cap rates kick in on July 1st, take a meter reading to ensure you aren’t charged at the higher rate for energy you used before the change.
- Review Your Direct Debit: Check if your monthly direct debit accurately reflects your usage. If you’ve built up credit over the milder months, you might be able to request a refund or lower your payments before winter.
- Check for Support: Ensure you are receiving all the help you’re entitled to. Check eligibility for the Warm Home Discount or schemes via your local council.
- Be Cautious with Fixed Deals: The number of fixed tariffs has slumped from 38 on Saturday to 15 recently, and those remaining have jumped in price to a range of £1,640-£2,194 [14]. Energy UK’s Ned Hammond added that “should current gas prices remain as high as they are for several more weeks, this could have a material impact on future price caps” [14]. Always compare any fixed deal against the current cap and the forecast.
We will continue to monitor the situation and update you as the official July Price Cap is confirmed by May 27th [2].
Did you notice the spike at the pumps this week? How are you preparing for the expected rise in energy bills this summer? Let us know in the comments below.
References
- Cornwall Insight – Price Cap Forecast July 2026
- Reuters: UK energy price cap forecast to rise in July
- U.S. Energy Information Administration – Strait of Hormuz
- Janes – Strait of Hormuz Maritime Security Analysis
- S&P Global – Tanker traffic through Hormuz drops 86%
- Anadolu Ajansı – Iran warns no oil to leave region
- Argus Media – Qatar declares force majeure on LNG
- RAC Fuel Watch
- Evening Standard – Londoners feel the pinch as fuel prices soar
- Ofgem – Energy Price Cap
- ZAWYA – Iraq halts Rumaila oil field output
- Bloomberg – Oil could hit $120 if crisis shuts Hormuz
- NIESR – Economic Impact of Iran Crisis on UK
- Energy UK – Fixed Tariff Tracker March 2026
Disclaimer: This article is for informational purposes only and reflects personal opinions and analysis of publicly available information. It does not constitute financial or professional advice. MoneyLad.co.uk makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. Readers should conduct their own research and consult with qualified financial professionals before making any decisions based on the content provided.
Last updated: March 2026
📋 Article fact-check verified:
- Strait of Hormuz oil flow: ~21 million barrels/day (~21% global) – Janes / EIA [3]
- IRGC “not a single drop” threat – Anadolu Ajansı [6]
- UK fuel prices: petrol 137p, diesel 148p (16-month high) – RAC [8] / Evening Standard [9]
- July price cap forecast: £1,801 (10% rise) – Cornwall Insight [1] / Reuters [2]
- Iraq Rumaila field halted – ZAWYA [11]
- NIESR interest rate warning: could exceed 4% – NIESR [13]
