Households face a £196 annual increase in energy bills from July as the fallout from the Iran conflict continues to unsettle global wholesale markets, according to new industry forecasts.
Energy analysts at Cornwall Insight now expect the next Ofgem price cap to rise to £1,837 for a typical dual-fuel household between July and September — a 12 per cent increase on the current level.
The forecast is lower than earlier projections, which warned bills could climb by as much as £332 to £1,973, reflecting some easing in wholesale gas prices after the sharp spikes seen at the start of the conflict in the Middle East.
However, experts cautioned that the situation remains highly volatile, with energy markets still reacting to geopolitical instability and disruption across key supply routes.
Cornwall Insight said a rise in the cap is now “effectively unavoidable”, given that higher wholesale prices have already been locked into the regulatory calculation, leaving little room for downward revision before Ofgem’s final announcement on May 27.
Wholesale energy prices surged after the outbreak of conflict involving Iran, with markets particularly sensitive to risks around the Strait of Hormuz, through which a significant share of global oil and liquefied natural gas is transported.
At one stage, crude oil prices briefly spiked to around $120 a barrel, while European gas markets also saw sharp upward pressure amid fears of supply disruption and attacks on regional energy infrastructure.
The current cap of £1,641 was introduced in April, marking a 7 per cent reduction, largely driven by government adjustments to environmental levies that reduced bills by an average of £150.
But the latest outlook suggests that relief may be short-lived. Analysts warn that sustained geopolitical tensions could keep prices elevated well into the autumn, particularly if shipping routes remain under threat.
The Government has said it is monitoring developments closely and has not ruled out further targeted support for households if energy costs continue to rise sharply.
Ministers have already extended electricity bill support for 10,000 firms in a bid to cushion businesses from volatile wholesale markets, though households remain directly exposed through the price cap mechanism.
Cornwall Insight said wholesale prices are unlikely to return to pre-conflict levels unless there is a stabilisation in Middle Eastern supply routes, particularly through the Strait of Hormuz, which remains a critical artery for global energy flows.
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