What happened, and when
The UK entered 2026 in a relatively benign energy market, with the April price cap having eased to £1,641, its lowest level in nearly three years. The central question for households was whether that improvement would hold into the summer and autumn.
That equilibrium proved short-lived. The Iran conflict rewrote the outlook decisively, and a single mechanism explains it: the Strait of Hormuz.
Why the UK is exposed
Hormuz carries greater consequence for the UK than the headline "Middle East oil route" framing implies. Liquefied natural gas (LNG) represents the more pressing exposure.
Qatar's Ras Laffan complex ranks among the world's foremost LNG export terminals, and Hormuz is its only route to market. Qatar supplied 12-14% of Europe's gas imports before the closure.
The US Energy Information Administration estimates the closure removed over 10 billion cubic feet of LNG per day from circulation. That equates to roughly 20% of world LNG trade.
The UK depends on LNG to balance supply far more than Germany or Central Europe, which retain extensive pipeline infrastructure. When LNG flows contract, the UK has limited alternatives to fall back on. The Dutch TTF hub sets European gas pricing and reacts sharply to any LNG shock.
Markets repriced supply risk within days. The UK absorbs European wholesale gas pricing wholesale, even for North Sea production. Dutch TTF nearly doubled past €60/MWh by mid-March, and UK wholesale gas climbed roughly 75% over the same period.
Ceasefire talks in late March produced temporary relief, and TTF duly retreated from its peaks.
By 24 April, however, LNG delivery prices remained 35% above pre-closure. The closure persisted. Rerouted US and Australian cargoes plugged part of the shortfall, albeit at substantially higher cost and longer transit times.
What it has done to UK households
The price cap has cushioned the direct impact on bills, since Ofgem fixes unit rates each quarter regardless of wholesale movements. Q2 standard variable customers still pay at the £1,641 annual rate, even as wholesale prices have moved well above that level.
The impact reaches households through two indirect channels.
Inflation. UK CPI rose to 3.3% in April 2026, driven heavily by petrol, which moves with oil almost in real time. Supplier hedging arrangements then pass the remaining wholesale costs through with a lag.
The Bank of England identified the UK as one of the worst-affected major economies from the Hormuz disruption. CPI could exceed 5% later in 2026 if the disruption persists into the second half of the year.
The future price cap. Ofgem's Q3 (July-September) assessment window runs from February to mid-May 2026, and the Iran spike sits squarely inside it. Forecasters now expect the Q3 cap to settle in the £1,866-£1,929 range, an increase of 14-18% on the April level.
The UK imports relatively little Gulf oil. North Sea production, Norwegian pipeline gas and a diversified LNG portfolio cover most domestic needs. Pricing, however, follows global benchmarks rather than the source of the molecule. When Hormuz constrains Qatari LNG, global spot prices climb as buyers compete for replacement supply.
Those global prices feed into UK wholesale contracts, propagate into Ofgem's cap calculation, and ultimately surface on household bills. Geography matters far less than pricing dynamics.
What happens next depends on Hormuz
Markets have effectively settled the Q3 cap, with Ofgem's assessment window due to close on 17 May. Q4 (October-December) hinges on whether the disruption persists when markets price that quarter.
- Hormuz reopens this summer. Qatari LNG flows resume, storage refills on cheaper supply, and the Q4 cap settles below Q3.
- Disruption continues partially. Rerouted cargoes keep supply tight. The Q4 cap remains broadly flat, while inflation stays sticky.
- Prolonged closure. European storage enters winter at depleted levels. The Q4 cap exceeds Q3, and seasonal heating demand converts that into genuine bill stress.
Forecasters remain divided on the outcome. Ceasefire progress represents the single biggest variable for UK bills in the second half of 2026.
Q3 covers the summer months, when gas consumption is low, so most households will not feel a £1,900 cap acutely.
October alters the picture. A high Q4 cap lands precisely when households reactivate central heating, and the headline annual figure translates into tangible monthly spend.
Your decisions before 1 July
Ofgem has already set the Q3 cap in everything but name. Households now face a single binary decision: variable or fixed before July.
- Already on a competitive fix that runs into spring 2027? You sit in a strong position and can disregard the noise.
- On a standard variable tariff? A 12-month fix priced below £1,850 hedges both the Q3 increase and any subsequent Q4 movement.
- Fix expires between July and October? You will roll onto the cap at Q3 rates. Compare new fixes against the Q4 forecast as your expiry approaches.
Iran war and UK energy prices: FAQ
How has the Iran war affected UK energy prices in 2026?
The 27 March Hormuz closure cut around 20% of global LNG supply. UK wholesale gas peaked roughly 75% above pre-conflict levels and remained 35% above pre-closure by late April. Forecasters now expect the Q3 price cap to rise 14-18%.
Why does the Strait of Hormuz matter for UK energy bills?
Hormuz is the only route out for Qatar's LNG, which supplied 12-14% of Europe's gas. The UK leans on LNG to balance supply, so global LNG prices flow into UK contracts via the Dutch TTF benchmark.
How much will the UK energy price cap rise in July 2026?
Forecasters put the July-September cap at £1,866-£1,929, up 14-18% from the £1,641 April level. Ofgem confirms the Q3 cap on 27 May 2026.
Should I fix my energy tariff before July 2026?
A 12-month fix below £1,850 hedges the Q3 rise and any further Q4 move. Standard variable customers face the full cap movement. A fix running into spring 2027 already covers you.
Will UK energy prices come down in 2026?
Only if the Hormuz disruption resolves before markets price Q4. A summer reopening would pull Q4 below Q3. Continued disruption keeps Q4 flat or higher.
What is the impact of the Iran war on UK inflation?
UK CPI hit 3.3% in April 2026 with energy a big contributor. The Bank of England flagged the UK as among the worst-hit major economies. CPI could exceed 5% later in 2026 if disruption persists.