UK petrol prices: Iran crisis could send prices of fuel to 150p a litre - will gas and energy bills go up?
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Fears over a key global shipping route have rattled markets, raising concerns about what drivers and bill-payers could face ⛽
- The price of oil has hit a one-year high amid fears over Strait of Hormuz disruption
- And European gas prices have surged at their fastest pace since 2022
- Higher crude costs as a result of the Middle East conflict could push UK petrol prices up within weeks
- Rising gas prices may then increase pressure on Ofgem’s energy price cap
- The impact on household bills could depend on how long the tensions last
If you rely on your car or are watching your direct debit for energy bills, the conflict in Middle East is likely matter to your wallet.
While hostilities between the US, Israel and Iran may seem like they’re thousands of miles away, recent events have sent shockwaves through global energy markets.
Oil prices have jumped to a one-year high, gas prices have surged at their fastest pace since 2022, and stock markets across Europe have tumbled.
But will this translate into higher petrol prices and more expensive energy bills for UK households? Here’s what we know so far, and how it could all unfold.
Why energy markets are on edge
At the centre of the turmoil is the Strait of Hormuz, a narrow shipping lane between the Persian Gulf and the Gulf of Oman on Iran’s south coast. About a fifth of the world’s traded oil, as well as large volumes of liquefied natural gas (LNG), pass through it.
Following the recent US and Israeli strikes on Iran, Tehran has threatened to block tanker traffic through the strait, and there have also been reported attacks on vessels and energy facilities in the region.
While the strait technically remains open at the time of writing, the mere risk of disruption is enough to spook markets.
Brent crude, the international benchmark used to price much of the world’s oil, has surged above 80 US dollars a barrel, at one point rising by more than 13%.
Gas prices in Europe have climbed even more sharply, jumping by more than 50% in a single day after Qatar temporarily halted LNG production following attacks on facilities.
Energy traders are pricing in the possibility that supplies could be squeezed if shipping is disrupted for weeks rather than days.
What it means for petrol prices
Global oil prices can have a critical impact on UK drivers, since crude oil is refined into petrol and diesel.
When wholesale costs rises, retailers eventually pay more, and that typically feeds through to pump prices within days or weeks.
Motoring groups have already warned that increases are likely. The AA has said pump prices will “inevitably increase” if disruption continues, while the RAC says there is “potential” for rises, though it’s not a certainty unless oil prices stay elevated.
Petrol had fallen as low as around 131.9p per litre last month. Analysts say prices could return to around 135p per litre, levels seen at the start of the year, if current oil prices persist.
But if crude were to surge towards 100 dollars a barrel and remain there, petrol could edge closer to 150p per litre.
Thankfully, there is currently no need for panic buying, as it takes time for wholesale increases to filter through, and the UK currently has no reported supply shortages.
Why gas prices could matter even more
While oil grabs the headlines, UK household energy bills are more closely tied to natural gas prices.
Gas is used to heat millions of homes and plays a central role in electricity generation. In the UK’s electricity market, gas-fired power stations often set the marginal price, meaning higher gas costs can quickly push up electricity prices too.
The complication this time is liquefied natural gas (LNG). Qatar is one of the world’s largest exporters of LNG and much of it passes through the Strait of Hormuz. If exports are delayed or reduced, global gas markets could tighten sharply.
European wholesale gas prices have already seen their biggest daily surge since Russia’s invasion of Ukraine in 2022. If those elevated prices persist, UK households could feel the impact when the energy price cap is next reviewed.
Could the energy price cap rise again?
The UK’s price cap, set quarterly by Ofgem, is based largely on wholesale energy costs.
If gas prices spike and stay high, the cap could rise later in the year. But there is usually a lag of several months between wholesale market movements and changes to regulated bills.
That means households are unlikely to see an immediate jump, but sustained unrest in the Middle East could push bills higher in future updates.
The Government says it is monitoring the situation closely and stresses that the UK benefits from relatively diverse energy supplies sourced from outside the Middle East. For now, there are no reported impacts on domestic fuel stocks.
Will household bills increase?
At this stage, it depends on how long the disruption lasts, and short-lived tensions may lead to relatively small, temporary increases in petrol prices.
But if tanker traffic through the Strait of Hormuz is blocked or severely restricted for weeks, the UK would likely see higher pump prices first, followed by potential pressure on gas and electricity bills.
For now, the energy markets are reacting to uncertainty. Whether that uncertainty turns into a renewed squeeze on household budgets will hinge on what happens next in one of the world’s most important energy corridors.
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