Donald Trump’s war with Iran is rapidly pushing up global oil and gas prices – and that means higher energy bills, fuel costs, and broader economic pressure for households look likely to follow across the UK.
The price of oil has surged past the $100 (£74) a barrel mark, reaching $106 (£79) a barrel on Monday morning, with an estimated 20 million barrels of oil per day now stranded in the Persian Gulf, as shipping vessels are unable to navigate safely through the Strait of Hormuz, the critical narrow waterway bordered by Iran.
Furthermore, the almost complete halt of oil from Iran itself means around three per cent of the global oil supply has effectively been cut off by the war – this is worse than the oil supply situation after Russia invaded Ukraine, analysts have said.
Goldman Sachs has warned that the price of oil could jump to as much as $150 (£112) per barrel by the end of March, hitting British consumers and businesses hard.
Meanwhile, natural gas prices in Europe have rocketed by 40 per cent, with an Iranian drone striking Qatar's biggest liquefied natural gas plant and halting supplies from one of the world's largest producers. In February this year, 35 per cent of natural gas used in the UK came from imported LNG.
As the war continues, with Israeli jets striking four oil depots in Tehran on Sunday, sending enormous polluting fireballs into the sky, Qatar has warned it could take “weeks to months” to return to any kind of normal gas delivery pattern to Europe.
The breakdown in supply is poised to send UK gas prices soaring, with experts warning that Britain is particularly susceptible to price shocks partly because it has so little storage capacity of its own.
The UK still relies heavily on gas, with around 30 per cent of the nation’s electricity coming from gas‑fired power stations – far more than Germany’s 17 per cent or France’s three per cent – and more than 70 per cent of British homes rely on it for heating, and many for cooking as well.
This dependence on fossil fuels leaves households especially exposed when international markets turn volatile.
On Friday, the UK’s gas reserves were sitting at just 18 per cent of their capacity, according to new data published by National Gas.
Analysts have warned that annual household bills could rise by up to £500 if the conflict continues.
Why will prices rise even though the majority of the UK's electricity generation comes from renewables?
Over 2025, renewables, led by wind, supplied more of the UK’s electricity than any other source, making up 47 per cent of the total, followed by gas (28 per cent), nuclear (11 per cent) and imports (10 per cent).
However, the UK's energy prices remain extremely vulnerable to global gas prices. Even though the North Sea provides some gas, the price it sells for is set by the international market, so it has practically zero impact on gas prices.
But the major reason electricity bills could rise is due to the UK’s “marginal pricing model”, which means that electricity prices are almost entirely dictated by gas prices.
This increasingly controversial system means the costliest power source needed at any given moment – which is almost always gas – sets the price for all electricity on the grid, even when cheaper renewables are supplying the majority of the power. With gas determining the market price around 98 per cent of the time, household bills in Britain are acutely exposed to swings in global gas markets.
Last year, amid unfounded criticism of the UK's legally-binding net-zero commitments being the key driver of high energy prices, Dhara Vyas, the chief executive of industry body Energy UK told clean energy website Carbon Brief it is “crystal clear what has driven electricity bills up in the UK [is] wholesale costs, driven by the price of gas”.
Sir Keir Starmer told the Commons last week that Britain was taking measures to safeguard the supply, but his government is under mounting pressure to act further to protect consumers and ensure a long-term plan is in place to protect people from the volatility of the international fossil fuel market.
Many see the impact of price shocks as an opportunity to make long-term political decisions which will not only reduce uncertainty, but also make inroads into tackling the worsening global climate emergency. The UN is leading the call for decarbonisation as a means of reducing the burden of international conflict on populations around the world.
“The turmoil we are witnessing today in the Middle East makes it evident that we are facing a global energy system largely tied to fossil fuels, where supply is concentrated in a few regions and every conflict risks sending shock waves through the global economy,” UN secretary-general António Guterres said in an email to The Associated Press.
“In past oil shocks, countries had little choice but to absorb the pain. Now they have an exit ramp.
“Homegrown renewable energy has never been cheaper, more accessible, or more scalable,” Mr Guterres said. “The resources of the clean energy era cannot be blockaded or weaponised.”
In the UK, the war also means there will be a direct hit to drivers, with major increases in fuel costs on the way. AA president Edmund King said the latest turmoil “will inevitably lead to price hikes,” with “record prices at the pumps” expected within “10 to 12 days”.
Further economic woe for Britons includes mortgage rates increases, as the slow downwards trajectory of interest rates in recent months is disrupted by price rises for goods and services due to the impact of the war. Some lenders have already raised their rates on new fixed-term mortgages. NatWest, HSBC, Nationwide, Santander, the Co-operative Bank and Skipton Building Society are among those to have done so in the past week.
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