UK Energy Bills to Rise 13% in July as Iran Conflict Disrupts Strait of Hormuz Oil and Gas Shipments

Household energy prices will increase by 13% annually in July, as soaring wholesale costs stemming from the US-Israel war with Iran hit consumer bills for the first time. Regulator Ofgem stated the conflict means a typical dual-fuel household will pay £221 more per year, bringing the annual bill to £1,862. The price cap affects millions of homes on variable tariffs across England, Scotland, and Wales, with suppliers warning costs could climb further during colder winter months if the conflict persists.

Wholesale Price Surge and Geopolitical Drivers

Energy costs have surged after Iran, in response to the war, blocked the Strait of Hormuz—a critical shipping route through which a fifth of the world’s oil and gas is transported. The jump translates to an additional £18 per month for the average household using both electricity and gas. Households will see a 24% increase on gas bills and a 5% rise on electricity bills. The energy cap applies to 33 million households in England, Wales, and Scotland, while regulation and billing structures differ in Northern Ireland. The cap sets the maximum charge per unit of gas and electricity for variable tariffs. Approximately 40% of bill-payers on fixed tariffs remain unaffected until their contract terms end.

Ofgem’s Calculation and Usage Adjustments

Ofgem has illustrated the cap by calculating the annual bill for a “typical household” consuming 11,500 kilowatt-hours (kWh) of gas and 2,700 kWh of electricity per year, settled via a single direct debit. The regulator reduced what it considers typical energy usage, citing that many households have cut consumption due to persistently high prices in recent years and improved energy efficiency. This adjustment could mask the sharp rise in per-unit costs, but consumers will still pay significantly more for each unit of energy. From July, the typical bill based on current usage estimates will be £1,862, a rise of £221 annually. Under possible new usage estimates, the typical bill would be £1,663, though the current cap using those estimates would be about £1,490, making the increase proportionally similar. Ofgem last revised these so-called typical domestic consumption values in 2019 and 2023.

Government Response and Winter Outlook

Energy Secretary Ed Miliband said: “The rise in the price cap because of a war we did not choose is deeply unwelcome news for households across the country. We know people were under pressure before this crisis, and that's why easing that burden is our number one priority.” Domestic energy bills had fallen by 7% between April and July following a government overhaul of charges, announced just before the outbreak of the Iran conflict. However, the cap from July to September reflects a 25% increase in global gas prices caused by the war, particularly the effective closure of the Strait of Hormuz. Wholesale prices, paid by suppliers, account for about 40% of a household gas and electricity bill. Some suppliers forecast that energy prices could move even higher by autumn and winter. “The rise in July energy prices will be felt across households already stretched by the cost of living, and even though it was widely anticipated, that does not make it any easier to bear,” said Craig Lowrey from energy consultancy Cornwall Insight. “Even more concerning is October, where our forecasts are already pointing to a slight rise landing just as people start to turn their heating back on for winter.” The government said it is working on plans to provide targeted support for the most vulnerable if bills remain high into winter, when households use more energy. A typical household is already paying about £600 more per year than before the price shock of 2022-23. Billions of pounds in unpaid debts are owed to suppliers, and many people with disabilities have been disproportionately affected.

Context

This price cap increase follows a pattern seen during the Russia-Ukraine war, when global gas supply disruptions drove UK energy bills to record highs in 2022 and 2023. Similarly, the 1990 Gulf War led to temporary oil price spikes that raised domestic heating costs, though the current conflict’s impact on the Strait of Hormuz marks one of the most severe supply disruptions in decades.