Closing post
Time to wrap up
Fears are growing that the Middle East crisis will hit UK living standards, as the conflict keeps energy prices elevated.
The Resolution Foundation predicted this morning that the Middle East crisis could trigger an energy price shock that more than wipes out the £300 rise in living standards a typical working-age household could otherwise expect this year, a leading thinktank has warned.
It said a “decent” one-off increase in average living standards in 2026 and a bumper rise for lower-income households could be reversed by rising oil and gas prices as the Iran conflict disrupts supplies.
However, if the recent jump in energy prices persists, the foundation said all the gains could be wiped out.
While the effect may not be as large as the increase caused by the Russian invasion of Ukraine, which sent the cost of food, oil and gas soaring, a rise this year in oil and gas prices could add a percentage point to UK inflation and £500 on typical annual energy bills, it said.
Cornwall Insight predicted that the UK’s energy price cap could rise by 10% in July.
The RAC flagged that petrol and diesel prices have already risen this week.
European stock markets have rallied on a report claiming Iran is engaging in a “secret outreach” to end the war in the Middle East, after several days of heavy losses on indices around the world.
The New York Times reported that a day after the attacks began, operatives from Iran’s Ministry of Intelligence indirectly contacted the CIA with an offer to discuss terms for ending the conflict.
Officials briefed on the backchanneling are, however, sceptical – at least in the short-term – that either the Trump administration or Iran is really ready for an off-ramp, the report said. There are also questions over whether any Iranian officials could negotiate a ceasefire agreement, as Israeli strikes have taken out many senior figures.
The report helped push up the UK’s FTSE 100 share index by 1% in late trading, with the pan-European Stoxx 600 index up 1.6%.
UK households face the prospect of bills “whiplash” if the energy cap soars this summer, warns Richard Neudegg, director of regulation at Uswitch.com.
Responding to Cornwall Insight’s forecast that bills could rise 10% in July, Neudegg says:
“This prediction is a stark reminder of why relying on the price cap leaves customers exposed to global events.
While it’s still far too early to say with certainty what the price cap will be in July, if these predictions ring true, the majority of households could see a significant jump in household energy bills, driven by the situation in the Middle East.
Energy markets remain sensitive to major events, especially when they involve key gas transport routes.
These early forecasts come only days after Ofgem announced that the price cap will fall by £117 for the average household in April, so many households could feel whiplash with the potential changing direction of bills.
