US-Iran war will still hit energy bills despite ceasefire, experts warn

Experts have warned that energy bills could still see a significant increase in the summer months despite the ceasefire agreement between the US and Iran.

The two countries agreed to the eleventh-hour proposal overnight, announcing the agreement less than two hours before President Donald Trump’s deadline for Tehran to reopen the Strait of Hormuz.

The virtual closure of the waterway last month led to a massive increase in oil and natural gas prices, negatively impacting economies around the world.

After the agreement was announced, the barrel of oil fell by 14 percent to 93.93 dollars per barrel, while the thermal price of natural gas fell by 17 percent to 111.26 pennies.

But despite the conditional reopening of the Strait of Hormuz, UK households have been warned that the threat of a rise in energy costs may still be present.

Chief consultant of the prestigious Cornwall Insight magazine, Dr. Craig Lowrey said: “A ceasefire may relieve some of the immediate pressure on gas markets and this may reduce price ceiling forecasts for July but will not eliminate the situation completely.”

Energy regulator Ofgem sets the price cap using a three-month ‘observation period’ for the July period, running from 18 February to 18 May. This means that the increase in wholesale gas prices will be at least partially taken into account when determining the cap.

Dr Lowrey explains: “The announcement of a two-week ceasefire has caused gas prices to fall, but prices remain above pre-conflict levels. “If the Strait of Hormuz is opened and remains open, this will help ease prices further and will be reflected in the eventual July cap.

“But it’s not just about transport. Significant damage to gas infrastructure means supply constraints will continue. While Liquefied Natural Gas (LNG) shipments are expected to restart, it will take years for some of Qatar’s LNG capacity to be fully rebuilt.”

“This loss of capacity puts pressure on the global market and leaves it vulnerable to shocks. As a result, even with a ceasefire, wholesale gas prices will likely remain high for some time, limiting how far the July price ceiling can fall.”

In February, Ofgem set the cap for April-June at £1,641; This represents an average reduction of £117 and is broadly in line with Labour’s pledge to reduce energy bills by £150.

This means that bills are effectively protected until July. A forecast by Cornwall Insight before the ceasefire was announced last week suggested this could add up to as much as £288 for the average household.

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Despite the ceasefire in Iran, the damage has been done to households. Increases in oil and gas costs have already damaged household finances and will continue to have an impact on energy bills in the coming months.”

“Oil, LPG and gas costs have remained high for more than five weeks, with immediate impact on some households, and all households will feel the costs from 1 July when the next Ofgem price cap period begins.

“As long as our energy system is dependent on oil and gas prices, history will continue to repeat itself and our bills will be at the mercy of the decisions made by Trump, Putin and the Gulf States.”

A Department for Energy Security and Net Zero spokesperson said: “Tackling the affordability crisis is the government’s top priority. That’s why we’re taking action to reduce bills now and over the long term.

“Our action in the Budget has seen the price cap fall to £117 this April, which will remain in place until the end of June. We have also extended the £150 warm homes discount to around six million households.”

A spokesman for Ofgem said: “The conflict in the Middle East is a fast-moving situation and we are monitoring and assessing its impact on the energy market.

“We know people are concerned about the impact of the dispute on their energy bills. It’s important to note that customers on fixed tariffs and protected by the price cap will not see an immediate impact on their bills as the price cap has already been set until the end of June.”