British households could see annual energy bills rise by £500 if elevated oil and gas prices persist, according to analysis from the Resolution Foundation.
The warning followed Rachel Reeves’s Spring Statement on Tuesday and reflects the impact of escalating hostilities between the United States and Iran on wholesale energy markets.
Wholesale gas prices in Britain have almost doubled since fighting intensified after US and Israeli forces launched strikes against Iran.
In a statement, the Resolution Foundation said: “If recent rises in the price of oil and gas were to be sustained they could add around a percentage point to inflation and £500 on to typical annual energy bills.”
The assessment comes as households were preparing for lower costs after Ofgem confirmed an April reduction in the energy price cap.
Qatar’s state energy company has halted liquefied natural gas production indefinitely, removing a major global supplier from international markets.
Shipping through the Strait of Hormuz has also been disrupted, with oil tanker traffic slowing significantly amid security concerns.
The global benchmark Brent crude has risen by more than 10 per cent since the outbreak of hostilities.
Wholesale gas prices in Britain have almost doubled since fighting intensified
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Martin Lewis described the rise in wholesale gas prices as “scary” but urged caution in comparing the current situation with previous crises.
He said: “I’m not saying it won’t get worse and I’m not saying it won’t be sustained, but I think there is a little bit of putting it into perspective at the moment, we are not currently in the Ukraine type spike situation, but it has gone up.”
Ms Reeves is due to hold talks with North Sea industry leaders to discuss the impact of rising prices and potential responses.
The meeting was announced during the Spring Statement amid calls for an emergency strategy to mitigate the effects on households and businesses.
Discussions with oil and gas executives are expected to focus in part on the sector’s tax regime, which currently stands at 38 per cent.
The Government has pledged to reduce average annual energy bills by £150, following Ofgem’s latest price cap adjustment.
The global benchmark Brent crude has risen by more than 10 per cent since the outbreak of hostilities
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However, if wholesale prices remain elevated, the cap could rise again within three months, reversing recent reductions.
The Resolution Foundation said lower income households would be disproportionately affected by further increases because they spend a larger share of their income on energy.
Ruth Curtice, chief executive of the think tank, said: “This coming year is set to be a decent one for living standards, and a bumper one for poorer families, as wages and benefit support rise above the level of inflation, but a fresh energy price shock risks puncturing this good news.”
Labour MP Graeme Downie, a member of the Commons energy select committee, said: “The consequences of the actions by Iran could be felt here in the UK through increased energy bills quickly and painfully and it will be those who have the least who will be hurt the most.”