UK gas prices spike over 90 per cent amid US-Iran war
Gas prices in the UK have nearly doubled as the war between US and Iran ramped up since the weekend.
The price of UK wholesale gas prices – which reflect the costs energy suppliers pay to producers for natural gas before selling to household and businesses – has rocketed by 93 per cent in just this week alone.
The price of gas briefly hit 151p a therm amid the conflict in the Middle East, a level not seen since February 2023, before easing back to around 148p.
The move followed a 32 per cent jump on Tuesday, which sits on top of a 50 per cent rise on Monday.
Sanjay Raja, chief UK economist at , said the flare up in prices could “raise inflation and dampen growth”.
“Any escalation feed into risk premia, freight disruptions and precautionary stock-building in oil and gas markets,” he added.
Households could get stung by soaring bills
Soaring gas prices have triggered a major cost-of-living warning with electricity prices tethered to wholesale gas costs, meaning things like the energy price cap set by Ofgem could be raised or lowered due to these surging costs and have a knock-on effect on household bills.
Economists at Investec said: “The main economic consequence of higher energy prices would be to boost inflation.
“In the UK, illustratively, the current level of the oil price would, if maintained, add about 0.2 per cent to headline inflation via higher petrol prices; and a sustained 40 per cent shift up in natural gas price futures would boost this by a further 0.7 per cent or so, via higher household utility bills.”
Analysts at Stifel warned on Monday any sustained increase in wholesale gas prices could feed into the next adjustment to Ofgem’s price cap, with a trebling seeing the cap jump to near £2,500 a year from £1,641 at present – a spike not seen since Russia’s invasion of Ukraine.
The initial surge in gas prices came after a Qatari state energy company said it had ceased production of liquified natural gas (LNG) following “military attacks” by Iran.
The centre is the world’s largest export plant for LNG and poses dire consequences for Europe, with Qatar supplying around 12 to 14 per cents of the continents LNG imports.
Elsewhere, oil prices extended their run by 3.2 per cent on Tuesday morning to $80 a barrel.
“Oil price spikes usually follow conflict outbreaks, but the fact remains that escalation and duration is more of a concern than the immediate outlook, where many countries have accumulated stockpiles which could see them through the coming months,” Richard Hunter, head of markets at interactive investor, said.