Can the UK energy market take another geopolitical shock?

In a global system still nursing economic scar tissue from Russia’s invasion of Ukraine, the newest rupture in the world’s most strategically sensitive energy corridor in the form of the Iran-US-Israel war has already triggered a wave of turbulence that ministers, regulators and households are watching with a sinking feeling of familiarity. 

Across Europe, benchmark gas prices have doubled since the first strikes, and UK gas prices have climbed sharply over the last two weeks. That spike is driven by the same structural vulnerabilities policymakers have long warned about: heavy reliance on seaborne gas and oil shipments transiting the Strait of Hormuz and the dominance of Middle Eastern supply in global LNG markets. QatarEnergy’s suspension of LNG production after damage to facilities has only tightened supply further. 

For the UK, which imports a significant share of its LNG from Qatar and other global suppliers, the implications are immediate. Energy suppliers have pulled many of their fixed-price tariffs from the market, and households on standard variable tariffs - protected only in the short term by the Ofgem price cap - face the prospect of significantly higher bills when the next cap adjustment lands. Analysts at Citi suggest annual household energy bills could rise by £344 within months, while others warn that prolonged disruption could push typical bills back up towards £2,000-£2,500 later in the year. 

This comes at a moment when millions of households remain exposed to historic cost-of-living pressures. If the war continues for much longer, the political question of whether and how the government steps in will move from speculative to urgent. 

Keir Starmer has struck a notably cautious tone. In public appearances this week, the Prime Minister emphasised that the government is “monitoring the risks” and preparing for “potential impacts on every household and business”. With the last government’s emergency support schemes in the wake of the outbreak of war in Ukraine costing around £44 billion, Starmer and Rachel Reeves face the uncomfortable arithmetic of repeating large-scale interventions at a time of tight fiscal constraints. 

Moreover, the politics are more complicated than simply turning the support tap back on. Labour entered office with a mandate to restore economic stability and champion a more muscular, investment-led approach to net zero. But spiralling energy prices cut across that narrative in an awkward way. Higher gas prices feed inflation; higher inflation fans interest rate pressure; and households already battered by mortgage costs may prove less patient with arguments for long-term transition when the immediate question is whether they can afford their bills. 

Still, Starmer has thus far resisted calls - chiefly from the Conservatives and Reform UK - to scrap climate policies or pursue new North Sea drilling. His position, articulated forcefully in recent days, is that the crisis underscores the need to double down on clean, domestic energy, not retreat from it. Ed Miliband, the Energy Secretary and architect of Labour’s net zero programme, has framed the moment as confirmation of what he has warned for years: the UK will remain vulnerable to global fossil fuel volatility until it breaks its reliance on imported gas. 

At present, ministers have avoided committing to a new household support scheme, but hints are growing louder. Energy bills are due to fall modestly in April under the existing cap, but analysts warn that this relief will be short lived. If the July recalculation pushes the cap close to £2,000 again, the government faces the same dilemma faced by its predecessors: intervene or risk a political backlash from families seeing hundreds of pounds added to annual bills. 

A Liz Truss-style blanket freeze appears unlikely. But more targeted measures, such as temporary bill rebates, expanded Warm Home Discount eligibility, or support for households using heating oil, are being actively discussed inside government and across the sector. 

Reform UK has seized on the crisis to sharpen its criticism of the government’s net-zero policies. Nigel Farage and Richard Tice have argued that the UK should respond to the conflict by boosting domestic fossil fuel production and scrapping climate‑related levies. But even within Reform UK there is disagreement on how closely Britain should align with US and Israeli military action - splits that have been noticeably more visible in recent interviews. 

Still, the party’s core argument that net zero imposes unacceptable costs at a time of global turmoil could resonate with voters who see their energy bills rising again – despite the fact that it is very far from certain that permitting new North Sea oil drilling licences would have the desired effect on domestic energy prices. For Labour, this amplifies the political risk: any misstep in handling the crisis could open space to their right and left simultaneously. 

In the longer term, the government is likely to position the current crisis as evidence supporting its energy security strategy: a rapid expansion of offshore wind, solar, grid capacity, and low‑carbon flexibility such as battery storage. Reeves’ discussions with G7 counterparts this week, including the possibility of coordinated oil reserve releases, reflect a broader diplomatic attempt to contain the worst of the shock. 

But geopolitics remains the decisive variable. The longer the conflict in Iran persists, the more entrenched higher wholesale prices become - and the harder it will be for the government to avoid further intervention.