Household energy costs in the UK could climb sharply if ongoing disruption to Middle Eastern gas supplies continues, with analysts warning bills could approach crisis-era levels seen during the energy shock following Russia’s invasion of Ukraine. Wholesale prices spiked after military escalation involving Iran, Israel, and the United States, raising concerns over longer-term impacts for consumers.
Britain’s benchmark wholesale gas price, NBP, jumped as much as 54 per cent to 122p per therm after QatarEnergy halted liquefied natural gas (LNG) production following drone and missile attacks on its Ras Laffan and Mesaieed facilities. Brent crude oil also rose about 9 per cent to $79.40 a barrel.
Qatar, the world’s second-largest LNG exporter after the United States, and the UAE together account for roughly 20 per cent of global LNG supply. Much of that gas passes through the Strait of Hormuz, a narrow but critical shipping channel connecting the Gulf to international markets. Shipping through the strait has largely stalled after Iran reportedly targeted tankers in retaliation for US and Israeli strikes that killed Supreme Leader Ayatollah Ali Khamenei.
Although most Qatari LNG is destined for China and India, any supply disruption increases global competition for alternative cargoes, pushing up prices in Europe and the UK. European and British gas markets are closely linked by pipeline infrastructure, so volatility abroad quickly impacts domestic costs.
Tom Marzec-Manser, director for European gas and LNG at Wood Mackenzie, said the potential scale of disruption explains the market reaction. “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. The key question now is how long the Strait remains closed. The longer it takes to reopen, the higher prices are likely to go,” he said.
Europe relies on LNG for roughly a quarter of its gas consumption and currently holds lower-than-usual stockpiles after a cold winter. Analysts at Stifel warned that if Qatari and Emirati supplies remain curtailed for an extended period, European gas prices could triple, pushing wholesale costs above €100 per megawatt hour. In the UK, this could translate to around 250p per therm, potentially raising the energy price cap for households from the current £1,641 to about £2,500 annually.
Chris Wheaton, an analyst at Stifel, said a prolonged disruption would mirror the 2022 price spike. “If LNG production from Qatar and the UAE were disrupted for more than six weeks, or if shipping lanes remain blocked, we could see prices triple from pre-attack levels,” he said.
Dr Craig Lowrey, principal consultant at Cornwall Insight, noted that UK households remain directly exposed to global market volatility. “The April to June cap is already set, so there is no immediate impact. However, the July to September cap uses average wholesale prices over three months. If prices stay high, consumers will feel the effect later this year,” he said.
Rising energy costs could feed into broader inflation pressures, complicating the Bank of England’s monetary decisions. The trajectory of household bills now depends on how long Middle East tensions persist and whether shipping routes or infrastructure face sustained disruption, with markets closely monitoring the Strait of Hormuz as a key indicator.
