Household energy bills could climb to as much as £2,500 a year if the escalating conflict involving Iran leads to prolonged disruption in global gas supplies, analysts have warned, raising the prospect of a renewed energy crisis.
Wholesale gas prices in Britain have already surged by up to 50 per cent amid mounting fears of supply shortages, after QatarEnergy halted liquefied natural gas (LNG) production following military attacks on key facilities at Ras Laffan and Mesaieed. The move has intensified concerns over the stability of supplies passing through the Strait of Hormuz, a vital global energy chokepoint.
Britain’s benchmark gas price, NBP, leapt by 54 per cent to 122p per therm on Monday, mirroring similar spikes across continental Europe. The UK and European markets are closely linked through pipeline infrastructure, meaning price shocks are rapidly transmitted across both regions.
Analysts warn that if disruption to LNG exports from Qatar and the United Arab Emirates persists, wholesale gas prices in Europe could triple. Together, the two countries account for roughly a fifth of global LNG supply. Qatar alone is the world’s second-largest LNG exporter after the United States.
Chris Wheaton, an analyst at Stifel, said that a prolonged closure of the Strait of Hormuz could push European gas prices back towards the levels seen during the 2022 energy crisis triggered by Russia’s invasion of Ukraine.
“If LNG production from Qatar and the UAE was disrupted, we see a repeat of 2022,” he said. “European gas prices would need to rise sharply to attract LNG cargoes away from Asia and into Europe.”
Wheaton suggested that UK wholesale gas prices could reach 250p per therm in such a scenario. At that level, the energy price cap set by Ofgem could rise to approximately £2,500 per year for a typical dual-fuel household, up from the current £1,641.
The strait is a critical maritime route through which a substantial share of the world’s oil and LNG flows. Shipping traffic has slowed dramatically after Iran reportedly targeted tankers in retaliation for US and Israeli strikes that killed Ayatollah Ali Khamenei, Iran’s supreme leader. Brent crude oil has also climbed, rising around 9 per cent to $79.40 per barrel.
Although much of Qatar’s LNG is destined for Asian markets such as China and India, any disruption would intensify global competition for alternative cargoes, driving prices higher for European buyers.
Tom Marzec-Manser, director for European gas and LNG at Wood Mackenzie, said traders were closely monitoring how long the disruption might last.
“The prospect of around 20 per cent of the world’s LNG being cut off from the market has unsurprisingly led to a sharp rise in prices,” he said. “The longer the Strait remains effectively closed, the greater the upward pressure on gas prices.”
Europe currently relies on LNG for around a quarter of its gas supply. Storage levels are lower than usual following a colder winter, leaving the region more exposed to supply shocks.
Any sustained increase in wholesale prices would eventually filter through to consumers via the energy price cap. While the April to June cap is already fixed, the July to September level is calculated using an average of wholesale prices over the preceding months.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said the immediate impact on bills would be limited but warned that prolonged volatility would have consequences.
“For customers on the default tariff cap, there should be no immediate impact on bills,” he said. “However, the long-term effect depends on how long wholesale prices remain elevated. The UK remains highly exposed to global gas markets.”
The government recently announced that average energy bills would fall by £117 from April, offering some relief to households after years of high costs. Analysts caution that those savings could be wiped out if wholesale prices continue to climb.
The Bank of England is also watching developments closely. A sustained spike in energy prices would risk reigniting inflationary pressures, potentially delaying expected interest rate cuts and placing further strain on household finances.
With geopolitical tensions high and energy markets tightly balanced, analysts say the next few weeks will be critical in determining whether current price spikes prove temporary or mark the start of another prolonged period of elevated bills.
