- UK wholesale gas prices jumped nearly 93 per cent within days.
- The surge followed escalating conflict between the US and Iran.
- Analysts warn rising gas prices could push household energy bills higher.
Gas prices in the UK have surged sharply as the conflict between the US and Iran intensified over the weekend, sending ripples through global energy markets and raising fresh questions about energy costs in Britain.
The price of UK wholesale gas, which reflects what suppliers pay producers before selling gas to households and businesses, has climbed nearly 93 per cent within the week. Prices briefly reached 151p per therm, a level last seen in February 2023, before easing slightly to around 148p per therm.
The surge came quickly. Gas prices had already jumped 50 per cent on Monday, followed by another 32 per cent rise on Tuesday, pushing the market sharply higher within days.
Market watchers suggest the spike appears linked to growing uncertainty around global energy supplies as tensions escalate in the Middle East.
When global tensions begin shaping energy costs
Economists say the latest surge could start feeding into inflation if prices remain elevated.
Sanjay Raja, chief UK economist at Deutsche Bank, reportedly said the flare-up in gas prices could “raise inflation and dampen growth,” as quoted in a news report.
He added that any escalation could feed into risk premiums, freight disruptions and precautionary stock-building in oil and gas markets.
The initial surge in prices reportedly followed news that a Qatari state energy company halted production of liquefied natural gas after what it described as military attacks by Iran.
The facility is believed to be the largest LNG export plant in the world, meaning any disruption there could ripple through global energy supply.
Qatar supplies roughly 12 to 14 per cent of Europe’s LNG imports, making the region particularly sensitive to any slowdown in production.
Energy bills back in focus
Wholesale gas prices play a major role in determining electricity costs in the UK because gas continues to power a significant share of electricity generation.
That means the energy price cap set by Ofgem could eventually move if wholesale prices remain elevated.
Analysts at Stifel warned that if wholesale gas prices were to triple, the price cap could rise to nearly £2,500 a year, compared with about £1,641 at present. Such levels were last seen after Russia’s invasion of Ukraine triggered an energy crisis across Europe.
Richard Hunter, head of markets at Interactive Investor, reportedly said energy prices often spike when geopolitical conflicts erupt, but the bigger concern tends to be how long the disruption lasts, as quoted in a news report.
He added that several countries currently hold energy stockpiles that could help cover demand for the coming months.
For now, however, the sudden jump in gas prices has once again placed the UK energy market under pressure, with households watching closely to see where costs might move next.
