Middle East Crisis Could Add £500 to UK Energy Bills This Summer, Warns Think-Tank
Household energy bills could rise by more than £500 this summer if the ongoing Middle East crisis continues to escalate, a leading think-tank has warned. The Resolution Foundation issued the stark alert as gas prices surged to a three-year high and oil markets experienced dramatic volatility following Iranian military threats to disrupt shipping in the Strait of Hormuz.
Iranian Threats and Global Energy Markets
Iran has declared the Strait of Hormuz, the world's busiest oil shipping channel where the Persian Gulf meets the Arabian Sea, effectively 'closed' amid its escalating conflict with the United States and Israel. A senior Iranian official warned that any vessels attempting to pass through the narrow 24-mile wide strait would be set ablaze by Revolutionary Guards and naval forces.
This aggressive posture has brought maritime activity in the vital waterway almost to a complete standstill, with ship tracking data revealing large clusters of oil tankers anchored at ports on either side of the strait. The disruption has sent global markets tumbling and raised fears of a prolonged energy crisis with potentially severe economic consequences.
Price Surges and Inflation Concerns
The global benchmark Brent crude oil price has already increased by more than 13 percent to just over $85 per barrel, reaching its highest level since July 2024. Analysts warn that if the conflict continues, prices could potentially hit $100 per barrel, which would translate to an additional 20p per litre for petrol and diesel within weeks.
In Britain, gas prices surged by 46 percent yesterday to over 165p a therm before settling at 146p in afternoon trading. This dramatic increase followed QatarEnergy, one of the world's largest exporters, halting production after military attacks targeted its facilities in Ras Laffan and Mesaieed.
Ruth Curtice, chief executive of the Resolution Foundation, warned: 'If overnight increases to oil and gas prices are sustained, we could see inflation back at 3 percent by the summer with typical energy bills £500 higher. Events in the Middle East have made support for families struggling with the cost of living more urgent.'
International Response and Regional Tensions
Former US President Donald Trump declared that the United States Navy would begin escorting tankers through the Strait of Hormuz 'if necessary,' emphasizing America's commitment to ensuring the free flow of energy worldwide. Meanwhile, the United States issued warnings of 'imminent' missile and drone attacks over Dhahran, Saudi Arabia, where the national oil company Aramco is headquartered.
The Financial Times reported that Iraq's crude oil production was nearing collapse as its largest fields shut down due to transportation and storage capacity issues. These developments have drawn comparisons to the economic impact of Russia's invasion of Ukraine in February 2022, raising concerns about potentially similar consequences for global energy markets.
UK Impact and Consumer Response
In Britain, motorists were urged not to panic-buy petrol despite growing fears that the conflict could drive up fuel costs significantly. The Petrol Retailers' Association called for restraint, with chief executive Gordon Balmer telling Sky News: 'To ensure we have adequate supplies to go round, exercise restraint and buy normally. Rising fuel prices hurt the economy in the form of higher inflation, impacting already hard-pressed household budgets.'
Nevertheless, reports emerged of petrol stations running out of fuel as Britons scrambled to fill their vehicles before anticipated price increases. Valero Garage in Beckenham, south London, exhausted its petrol supply on Monday evening after dozens of locals rushed to fill their tanks, with some even arriving with petrol cans. Similar shortages were reported at a BP fuel station in Croydon.
Political Criticism and Policy Demands
Chancellor Rachel Reeves faced criticism for allegedly ignoring support for drivers in her Spring Statement amid the emerging crisis. Howard Cox, founder of FairFuelUK, stated: 'This was a missed economic growth opportunity for the Chancellor amid a new damaging oil crisis. With refineries, oil tankers, and the Strait of Hormuz being targeted, oil prices will continue to climb relentlessly.'
Cox added that British politicians had failed to plan for energy self-sufficiency over two decades and called on the Chancellor to cut fuel duty or at minimum freeze it for the duration of the current parliament.
The RAC attempted to reassure drivers that there shouldn't be an immediate 'shock jump in prices at the pumps' since rising wholesale costs typically take time to filter through to retail prices. However, the organization acknowledged that sustained market pressures would inevitably lead to significant increases at forecourts across the country.
