Energy markets are in “turmoil” due to the intensifying Middle East conflict, a leading energy chief has warned, with the situation already impacting UK households.
Octopus Energy CEO Greg Jackson has said the “very challenging market” has led to energy provider to raise its fixed-price tariffs and introduce exit fees as oil and gas prices soar.
Several other major suppliers have now entirely withdrawn their fixed-price offerings in the wake of the conflict.
Data from Uswitch reveals the availability of such deals has more than halved in the week since strikes began between Iran and US-Israeli forces. Remaining fixed deals, closely tied to wholesale costs, have also seen significant price hikes.
As the exchanges continue, Iran has said it will “not let a single drop of oil leave the region”, as it threatens to attack any ship travelling through the Strait of Hormuz, a key lane for the worldwide oil trade. The US has said that it may begin escorting tankers through the passage to restart trade.
The situation has led to a spike in the wholesale gas rate, which have almost doubled since the start of the war. The figure is a key driver of UK energy prices.
Most UK households remain on variable tariffs and so are protected by the energy price cap set by regulator Ofgem. This will fall in April by around seven per cent due to policies announced by Labour last year. However, some experts have forecast that the current situation could now see an increase of 10 per cent announced in July.
Greg Jackson, chief executive of Octopus Energy, told Times Radio the company has to pass on some increases in wholesale energy prices to fixed-rate customers.
He said: “Fixed tariffs are based on the fact the day you want to take out a fixed tariff, the energy company goes to the wholesale market and buys a year’s worth of energy for you, and because the wholesale market are now reflecting at least some of the cost increases from the effects of the war in the Middle East, new fixed tariffs are then higher.
“Some companies won’t offer them at all because they are not confident in being able to lock in those prices a year in advance.
“Where you are seeing fixed tariffs they are now typically a hundred pounds a year more expensive than a year before the conflict.”
Many experts have now urged households to consider a fixed tariff energy deal, which guarantees customers will pay for their energy at a set rate for a set period of time, usually a year.
Octopus has also introduced an exit fee for customers seeking to leave these deals since the conflict began, but Mr Jackson stressed that many other suppliers already had these in place.
He added: “I am keeping a very close eye on the situation.
“In energy terms, Iran has effectively closed the Strait of Hormuz, which transports 20 per cent of the world’s oil and gas supplies, and Qatar has said it cannot honour its contracts to deliver its gas, so the energy markets are in a state of turmoil.
“The wholesale price of gas has roughly doubled since a week ago.”
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