6 months of Iran war – UK billpayers facing £190m extra costs for every week the conflict continues

New analysis from the Energy and Climate Intelligence Unit (ECIU) finds that higher wholesale oil and gas prices since the start of the US-Iran war, on 28th February, will add an estimated £9.8bn to UK energy and road transport costs. 

This includes over £5bn in higher gas and electricity costs that are expected to feed fully through into bills next year, alongside around £4.7bn in additional road fuel costs already being paid by motorists [1].

The analysis shows that, for every week the conflict continues, UK gas and electricity users are likely to face a further £190m in excess costs on energy bills, with the full effects being felt next year as wholesale gas prices feed through into contracted energy rates. This comes on top of around £183m per week in additional road fuel costs already being seen at the pump. 

Commenting on the analysis, Jess Ralston, Head of Energy at ECIU said: “Yet again, events thousands of miles away are having a direct impact on the cost of living in the UK because of slow progress on electrification and so ongoing dependence on oil and gas which is priced by international markets.

“The latest volatility in these global gas and oil markets shows how exposed households and businesses remain to geopolitical shocks. Gas prices just reached a 3-year high and oil prices remain inflated too, recently reaching over $90/barrel. Bills could go up again in January if the US Iran conflict continues.

“The lesson is the same as it was during the energy crisis triggered by Russia’s invasion of Ukraine: the more reliant the UK is on gas and oil, the more vulnerable consumers are to events beyond our control. The new Prime Minister has already committed to energy bill help, but let’s be clear more drilling in the North Sea won’t bring down bills and won’t stop the basin’s output from continuing its decade-long decline.

“Reducing demand for fossil fuels through electrification, net zero technologies like rooftop and balcony solar, heat pumps and electric steel, as well as British renewables are helping to protect more households against these recurring price shocks. But we could be further along that journey, and lobbying by gas boiler manufacturers and major housebuilders has slowed the switch to electric heat pumps, leaving more homes dependent on gas to keep warm and vulnerable to the actions of Putin and Trump.”

Analysts Cornwall Insight have recently said that energy bills are currently forecast to rise a further 9% in the new year, putting an average January bill up to £1,872 a year. This is due to gas price spikes over recent weeks combined factors including the summer heatwave across Europe.

The increase in wholesale gas prices is projected to add over £160 to the average household dual-fuel energy bill next year if prices remain high. Even after the conflict ends, gas prices are expected to remain high, for example from infrastructure damage to the Ras Laffan gas site which may have mid-term impacts on liquefied natural gas (LNG) markets [2]. 

At the same time, higher petrol and diesel prices have already pushed average household road fuel spending up by 14%, equating to £76 per household to date, and rising for every additional week of the war.

British industry, the commercial and public sectors are also seeing higher costs, with an extra £100m per week in gas and electricity bills expected to filter through next year and an extra around £100m per week in road fuel costs already being spent. 

ENDS

Notes to editors:

1. The relationship between gas prices and energy bills is strongest on a one year lag – meaning that our calculations relate gas prices today to energy bills in one year’s time. This is true for all sectors and all gas & electricity costs - these costs are yet to come ie. expected cost in future bills. The road fuels prices are much more immediately impacted by current oil prices, and reflected in weekly price data.

2. Gas Market Report, Q2-2026 (IEA), Europe’s Scramble for Gas Ahead of Winter Gets Harder (Wall Street Journal) 

Methodology:

The cost breakdowns across different economic sectors and fuels are taken from DESNZ’s DUKES table 1.3, spilt across gas and electricity for Industrial, Domestic and ‘Other’ sectors. The latest DUKES release runs to 2025 and therefore does not cover the 2026 conflict. Previous analysis used this historical data to assess excess costs over a pre-crisis baseline; this analysis instead quantifies the historical relationship between energy costs reported in DUKES and globally traded prices of natural gas, and uses these to understand the likely impact on UK energy costs resulting from the currently elevated energy commodity prices driven by the middle east conflict.

Timeseries data of annual average natural gas prices on the UK’s National Balancing Point (NBP) between 2014 and 2025 are taken from Our World in Data and adjusted for inflation using headline CPI. Cost lines from DESNZ’s DUKES table 1.3 are similarly adjusted, and simple linear regressions run to establish the relationship between gas prices and each cost line. Gas prices are seen to have greater explanatory value on bill costs under a 1-year lagged specification across most sectors, so we have chosen to use this lagged specification for our analysis, meaning that the energy bill costs calculated across all sectors are subject to a one year lag; higher gas prices now can be expected to impact bills across the economy next year. The figures reported here are calculated on this basis, but this does not preclude price increases resulting from the conflict being seen sooner.

Calculated coefficients were then applied to weekly average NBP prices throughout the period of the war to model expected impact on energy bills across each cost line and sector. Excess cost is defined as the total modelled expected cost, less a pre-crisis baseline cost based on average NBP prices observed during the same period in 2025. Stated results are central values within calculated error bounds; all coefficient values are statistically significant at the 5% level.

Figures for Scotland and Wales are disaggregated from the UK total using the same methodology as our previous analysis: ‘Other’ and ‘Industrial’ sectors’ costs are apportioned according to shares of economic output based on national GVA shares in representative sectors from ONS data, while domestic costs are apportioned by total number of households in each nation. 
 
As road fuel costs are available on a much more granular and timely basis and road fuel prices respond more immediately to oil prices, road fuel excess costs are calculated based on actual pump prices during the period of the war, compared against average pump prices during 2025. Prices are taken from table 4.1.1 of DESNZ’s monthly petroleum statistics dataset, and adjusted for inflation. Fuel costs are disaggregated into domestic/non-domestic and by nation based on vehicle type and local authority consumption figures from the ONS.

For more information or for interview requests:

George Smeeton, Head of Communications, ECIU, Tel: 020 8156 5305, M: 07894 571 153, email: george.smeeton@eciu.net