Energy price cap forecast jumps amid Middle East gas market turmoil

4 March 2026

Forecasts for Britain’s July to September energy price cap have risen to £1,801 a year for a typical dual-fuel household, following sharp increases in wholesale gas prices linked to escalating conflict in the Middle East.

The projection from Cornwall Insight represents a rise of £160, or 10%, on April’s cap announced last week. The increase reflects a surge in global gas markets, with the UK’s status as a net importer feeding through to domestic bills. Gas prices also influence electricity costs because gas-fired power stations often set the wholesale price of electricity.

Under Ofgem’s methodology, the final July cap will be based on average wholesale prices over a three-month assessment period that has only just begun. The level ultimately set will depend on how long gas prices remain elevated and whether current volatility persists.

Wholesale markets have climbed amid heightened regional tensions. Following US and Israeli missile strikes on Iran, retaliatory attacks from Iran damaged oil and gas infrastructure in key Gulf states. QatarEnergy paused liquefied natural gas production at several affected sites. Iran has also warned ships against using the Strait of Hormuz, a route that carries around a fifth of global oil and gas supplies.

Although the UK and Europe import relatively little Qatari LNG directly, reduced supply is expected to affect major Asian buyers including Japan, South Korea and Pakistan. Increased competition for replacement cargoes could push up prices in Europe and the UK.

The market reaction so far remains smaller than the shock after Russia’s invasion of Ukraine in 2022. Since then, Europe has diversified supply, expanded LNG import capacity and secured longer-term contracts, particularly with the United States. The UK now sources most of its LNG from the US, with a smaller share from Qatar. European gas demand has also fallen.

However, EU gas storage levels are low following winter drawdowns. Prolonged uncertainty could make summer refilling more costly, adding pressure ahead of next winter, although updated EU rules allow greater flexibility over storage targets.

Dr Craig Lowrey, principal consultant at Cornwall Insight, says:

“Looking at the April cap, the role of wholesale prices as a determinant of bills had eased given the impacts of policy costs and network costs. However, this latest forecast puts the role of wholesale markets firmly back in the spotlight and illustrates how exposed UK households remain to international market movements.

“While the rise is eye-catching, any immediate concern should be tempered. We are still early in the assessment period for the July cap, and what happens in the energy markets over the next three months will be the key factor, rather than this spike alone.

“Events like this reinforce the case for greater home-grown renewable generation. Reducing the UK’s reliance on volatile global gas markets is the most durable way to protect households from future price shocks.”