Energy bills are projected to skyrocket by £300 this summer as the US-Iran war is expected to result in widespread market “disruption”, analysts warn.
Forecasts from Cornwall Insight have updated their previous prediction for Ofgem’s July energy price cap from £1,807 to £1,973 as the cost of natural gas goes up.
This represents a hike of £332 from April’s cap of £1,641, which is the maximum households on average usage pay for gas and electricity when paying by direct debit.
Economists are sounding the alarm that wholesale gas prices, which is driver of UK electricity costs, are on the rise since the conflict in the MIddle East began.
Energy bills to surge by £300 in response to US-Iran war
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Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “Due to the nature of the cap methodology used by Ofgem, even if wholesale prices quickly return to pre-conflict levels, some of this recent volatility will be baked into the July 2026 cap.
“The ultimate scale of any increase will depend on how long the disruption continues, and while the cap can shield consumers from short term fluctuations in the market, it cannot offset a sustained rise in wholesale market prices.”
Following yesterday’s cost spike, oil and gas prices have retreated as financial markets calmed at the end of another turbulent week due to the escalating conflict in the Middle East.
UK natural gas prices fell two per cent lower once trading opened today, after rising more than a fifth on Thursday to their highest level in three years.
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Brent crude dropped back more than one per cent but remained firmly above 100 US dollars a barrel, at nearly $108, after big gains in the previous session saw it rise as high as $119 a barrel.
In response to the spike in gas prices, the Labour Government has unveiled a £53million cost of living support package for those who heat their home with oil.
However, Money Wellness’s energy expert Matthew Sheeran has called on Prime Minister Keir Starmer and Chancellor Rachel Reeves to do more
He said: “£53million sounds like a lot, but when you spread it across all the households affected, it won’t go far for families facing bills that have doubled almost overnight.
“There’s a real cliff edge here – support is focused on the most vulnerable, but a huge number of homes just outside eligibility still can’t afford sudden costs of £500 or more. Acting early, knowing your options, and making your oil and energy go further are essential to avoid a crisis.”
Escalating tensions in the Middle East have caused a spike in oil prices, prompting experts to urge the Government to act | GETTY/REUTERS
He added: “It’s also important to understand that if your tank runs dry, there is no guaranteed emergency supply. Unlike gas or electricity, suppliers aren’t legally required to deliver immediately, and slots can take days or weeks, often at higher prices.
“Some councils may offer small emergency grants, but these take time to access. That’s why topping up early, asking about payment plans, and joining community oil-buying groups is so important.”
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “This amounts to a £331 Trump Tax on household energy bills as the conflict continues. At the same time, energy industry profits are likely to rise again as households are left exposed to another global oil and gas price shock.
“Government should be preparing targeted help now for those most exposed, while speeding up the longer-term reforms that cut bills for good. No family should be left paying the price for global fossil fuel instability while energy firms cash in.”