Scotland facing £25m extra costs for every week the war in the Middle East continues
Scottish consumers set to shoulder over half a billion pounds in additional energy and fuel costs of US-Iran war; businesses and industry carrying largest share of the burden at around £290m.
By Jess Ralston
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New analysis finds that Scotland is facing around £25m extra costs for every week the war in the Middle East continues from higher gas, electricity and road fuel prices linked to turbulence in global energy markets. The impacts will be fully felt next year when higher gas prices filter through to domestic and non-domestic gas and electricity bills and, since the re-escalation of conflict in July, these costs are likely to rise [1].
As a result of higher prices to date, Scottish energy users are expected to spend over half a billion pounds (£520m) extra as a result of high oil and gas prices.
Of that, non-domestic users - including businesses, manufacturers, industry and the public sector - account for around £290m. This is equivalent to £15m a week in additional costs for Scottish industry. The majority of this has been from increased road fuel prices (£170m), such as petrol and diesel, which are more immediately sensitive to oil price increases while impacts of higher gas prices on energy bills are subject to a time lag. The cost of the war to industry through gas and electricity bills only, for example those for steel, cement and other energy-intensive manufacturing, are £2m per week.
Scottish households have already incurred almost a quarter of a billion pounds in additional costs since the start of the war, at around £230m, with road fuel costs accounting a little over half of this. By next year, as higher gas prices filter fully through to domestic energy bills, oil and gas price volatility will have added around £90 to the average Scottish household’s energy costs. With prices still well above pre-crisis averages, this figure is likely to rise further.
Commenting, Laura Anderson, Senior Consultant at the ECIU, said:
"The conflict in Iran has once again exposed how vulnerable Scotland remains to volatility in international oil and gas markets.
"While households are hit by higher petrol prices now and higher energy bills to come, Scottish businesses, manufacturers and public services are currently carrying the biggest burden with gas driving up their costs and making them less competitive. These costs are effectively a fossil fuel price shock being imported into the Scottish economy.
"The new UK Prime Minister has already pledged energy bill help to bail households out of some costs, but the only lasting protection from international oil and gas market turmoil caused by war thousands of miles away is to reduce dependence on fossil fuels altogether through electrification and British renewable power.
“More drilling in the North Sea won’t bring down prices which are largely set internationally, and with output set to decline irrespective of new drilling, unless greater effort is made to shift to net zero emissions technologies like electric heat pumps and EVs, Scottish businesses and households will become ever more vulnerable to the actions of figures like Putin and Trump. All eyes are now on the new UK government to see if they will try to slow the transition to electric cars.”
Oil and gas prices rose suddenly in March when the US-Iran war started, after a longer period of higher prices following the Russian invasion of Ukraine. In recent days, gas prices rose to a four-month high and oil prices rose to above $90 a barrel after a fragile ceasefire between US and Iran broke down. Even when the conflict ends, gas prices are not expected to fall suddenly because of damage to infrastructure such as the Ras Laffan complex, which impacts global supply of liquefied natural gas (LNG [2]).
Notes to the 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. https://www.iea.org/reports/gas-market-report-q2-2026/executive-summary / https://www.wsj.com/finance/commodities-futures/europes-scramble-for-gas-ahead-of-winter-gets-harder-d970ba5f
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 2024 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 2024 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.