Analysts are sounding the alarm that the energy price cap could more than double as a consequence of the ongoing conflict between the US and Iran.

The Islamic Republic has threatened to close the Strait of Hormuz, a vital trading route for oil imports, which could impact households energy bills in the UK.

Earlier this year, energy regulator Ofgem announced a seven per cent reduction in the price cap for July to September 2025, bringing average household bills down by £129 annually to £1,720.

This decrease is being driven primarily by falling wholesale prices, offers some relief to consumers.

Experts have issued a warning over the impact the US-Iran conflict could have on the energy price cap

Energy market experts are sounding the alarm about Middle East tensions and the possibility of Iran disrupting crucial energy supply routes.

Such a scenario could see UK households facing bills reminiscent of the 2022 energy crisis, potentially wiping out any gains from the recent price cap reduction.

Chris Wheaton, an oil and gas analyst at Stifel, has issued a stark warning about the potential impact of Middle East tensions on UK energy prices.

He cautions that if Iran closes the Strait of Hormuz, gas prices in Europe could return to the levels witnessed in 2022 following Russia's invasion of Ukraine.

Trump launched airstrikes against Iran over the weekend

"We are much more worried about European gas prices than we are about oil prices," Wheaton writes in a note.

He points out that approximately 20 per cent of global liquefied natural gas (LNG) production sits behind the Strait of Hormuz.

This represents 83 million tonnes of the global trade of 406 million tonnes in 2024.

"If LNG production from Qatar and the UAE was disrupted, we see a repeat of 2022: European gas prices rising so LNG flows to Europe and not Asian consumers to ensure storage is filled," he explained.

This could mean European gas prices returning to €100 to €200 per megawatt hour, approximately 2.5 to 5 times current prices.

"In a UK context, that would mean a UK energy price cap of £3,000-4,500 per year, which would be economically and politically disastrous, in our view," Wheaton warns.

Europe is only halfway through its seasonal gas storage refill, making the timing particularly precarious.

Ofgem is responsible for setting the UK energy price cap

Despite the recent reduction, energy bills remain significantly elevated compared to pre-crisis levels.

The new price cap of £1,720 per year for an average household represents a £660 decrease from the peak of the energy crisis in early 2023, when Government intervention through the energy price guarantee was necessary.

However, bills are still £152 higher than the same period last year, representing a 10 per cent increase. The reduction stems mainly from falling wholesale prices, which account for roughly 90 per cent of the decrease.

Direct Debit and prepayment customers will benefit from standing charges falling by approximately £19 annually.