Energy prices affected by Middle East crisis: how will it impact your bills?

Large energy providers, including British Gas, Eon Next and EDF, have removed tariffs from the energy market and are only offering limited switching opportunities to new customers as conflict escalates in the Middle East.

It comes as early predictions suggest that variable energy prices could rise 10% this summer as a result of volatile global gas prices.

Just last week, prices were expected to stabilise for the rest of the year following energy regulator Ofgem’s recent price cap cut, which will be in effect from 1 April.

But the new forecast from industry consultancy Cornwall Insight predicts an increase of £160 a year for the average typical energy bill, for those on variable, out-of-contract rates. This takes into account the escalating conflict between the United States, Israel and Iran, and its impact on Gulf states that are critical to the global energy market. 

Before this week, advice for households was that it's worth switching to a fixed deal, as the energy market has consistently offered fixed tariffs cheaper than the price-capped rates. 

That advice still stands. However, with uncertainty on the horizon, energy firms are rapidly withdrawing competitive tariffs from the market.

Read more: how to get the best energy deal  

Energy bill changes in April

All energy bills will still go down from 1 April as planned. The new predictions are for the price cap from 1 July.

If you have a variable tariff:

A typical household* on a variable tariff will pay £1,641 a year from April, a drop of £117 a year compared with January-March. That’s an average monthly saving of £9.75.

The price cap doesn’t limit your total bills. It caps the cost of each unit of gas and electricity you use. If your home uses more than average, you’ll pay more. If your home uses less, you’ll pay less. 

Read more: the energy price cap will drop by 7% in April 2026

If you have a fixed tariff:

Fixed-tariff customers will also see bills cut from April. That’s because the costs of most of two government schemes (the Energy Companies Obligation and Renewables Obligation) will be removed from all customers’ bills.

The government says this change could save a typical household around £150 a year. Look out for communication from your energy supplier confirming how your rates will change and how much you’ll save.

See more: all households to see energy bills cut from 1 April

Should I fix an energy tariff now?

We don’t know by how much and for how long a spike in global gas prices will impact energy rates, and it's important to note that there's time for a lot to change before this summer's price cap is decided. 

The energy regulator, Ofgem, looks at average wholesale prices over three months in order to set its quarterly price cap. Its next review is due at the end of May, and will take effect on 1 July.

But with gas prices volatile, it’s not a good time to be on a variable tariff, or a tariff tracking the price cap. These change prices every three months with the price cap, which is what's predicted to rise in July.

If you're not already on a fixed tariff, you should compare prices and see what your best option is.

However, try not to panic and fix a deal that's too expensive. As of 5 March, energy firms are rapidly changing the prices of their fixed deals and many tariffs are no longer available.

British Gas, EDF and Eon Next all have messages on their websites stating that they are offering limited tariffs at the moment. Octopus Energy has announced that it is introducing a £75 exit fee per fuel to its new deals, as a result of new price volatility.

If you do manage to find a fixed deal, check that it's cheaper than the current price cap. Things are changing rapidly, so we don't know how long the price spike will continue, nor when cheaper fixed deals might return.

When comparing prices, it’s worth noting how your rates will change from 1 April, as well as whether the rates you’re quoted for fixed tariffs have taken into account the cut in government scheme costs, so you know you’re comparing like for like.

Use our free, independent energy comparison service to compare gas and electricity prices and find the best provider for you.

Why is the Iran conflict affecting UK energy prices?

The wholesale global price of gas is currently extremely volatile. The wholesale gas price is what energy firms pay for the energy we use and is passed on to customers. It's a big driver of UK electricity prices too.

Oil and gas infrastructure across Gulf states has been damaged, and Iran has warned ships not to use the Strait of Hormuz, a vital shipping route for about 20% of global oil and gas.

Most of the UK’s Liquefied Natural Gas (LNG) comes from the US and only a small proportion is imported from Qatar. However, gas storage levels in the EU are low after winter and there may be increased competition in the global LNG market from those which rely more on LNG from the Middle East.

We don’t know by how much and for how long instability in the Middle East will impact global gas prices.

Dr Craig Lowrey, principal consultant at Cornwall Insight, said: 'Looking at the April cap, the role of wholesale prices as a determinant of bills had eased given the impacts of policy costs and network costs. 

'However, this latest forecast puts the role of wholesale markets firmly back in the spotlight and illustrates how exposed UK households remain to international market movements.

'While the rise is eye‑catching, any immediate concern should be tempered. We are still early in the assessment period for the July cap, and what happens in the energy markets over the next three months will be the key factor, rather than this spike alone.'

* Using a medium amount of energy, defined by Ofgem as 11,500kWh gas and 2,700kWh electricity per year.