Energy Market Turmoil Amid Middle East Conflict

The ongoing conflict in the Middle East, particularly between Iran and US-Israeli forces, has led to significant turmoil in global energy markets, directly impacting UK households. Greg Jackson, CEO of Octopus Energy, has reported that the wholesale price of gas has nearly doubled since the onset of hostilities, prompting energy suppliers to raise fixed-price tariffs and introduce exit fees for customers. The number of available fixed-price tariffs has more than halved within a week, according to data from Uswitch, with major suppliers like British Gas, Ovo, and Scottish Power withdrawing their fixed offerings entirely.

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As of now, the remaining fixed deals are priced significantly higher than before the conflict, with some tariffs increasing by over £100 annually. The cheapest fixed deal rose from £1,509 to £1,640, while the most expensive climbed from £1,898 to £2,194. The volatility in wholesale fuel markets has made it challenging for energy companies to guarantee prices for consumers over longer periods. Jackson emphasized that fixed tariffs are based on purchasing energy in advance, and current market conditions have made it difficult for companies to lock in prices.

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The surge in energy prices is raising concerns about a potential new cost of living crisis in the UK. Experts warn that rising energy bills could contribute to higher inflation, affecting mortgages, savings, and food costs. The price of Brent crude oil has recently surpassed $88 per barrel, marking its highest level since April 2024, and could lead to significant increases in petrol prices. Campaigners from FairFuelUK have reported that petrol stations are preemptively raising prices, with diesel reaching a 16-month high.

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Energy UK, the industry body representing suppliers, noted that the current market conditions have created major challenges for energy companies. While Octopus Energy has introduced exit fees for new fixed-tariff customers, Jackson clarified that many suppliers already had such fees in place. The energy price cap set by the regulator Ofgem is expected to fall by approximately 7% in April, but experts predict a potential rise of around 10% in July due to escalating gas prices.

The IndependentEnergy markets ‘in turmoil’, says Octopus Energy bossGB NewsThe Independent

Critics have raised concerns about opportunistic pricing behavior among petrol stations, with reports of significant price hikes despite prior stock purchases. Additionally, the ongoing conflict has led to fears that inflation could rise further, impacting food prices and overall economic stability. Rachel Winter from Killik & Co highlighted that while consumers may not feel the full impact of rising oil prices immediately, prolonged conflict could change that dynamic.

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While the energy market is currently in flux, the future remains uncertain. The National Institute of Economic and Social Research has indicated that the Bank of England may be forced to increase interest rates above 4% due to the conflict's impact on global markets. The upcoming interest rate decision on March 19 will be closely watched as the situation develops.

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• “He said: “Fixed tariffs are based on the fact the day you want to take out a fixed tariff, the energy company goes to the wholesale market and buys a year’s worth of energy for you, and because the wholesale market are now reflecting at least some of the cost increases from the effects of the war in the Middle East, new fixed tariffs are then higher.” — Greg Jackson, CEO of Octopus Energy

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• “In energy terms, Iran has effectively closed the Strait of Hormuz, which transports 20% of the world’s oil and gas supplies, and Qatar has said it cannot honour its contracts to deliver its gas, so the energy markets are in a state of turmoil.” — Greg Jackson, CEO of Octopus Energy

Energy markets ‘in turmoil’, says Octopus Energy boss

• “Global geopolitical events move markets, markets move swap rates, and swap rates ultimately shape the deals available to borrowers – all while the world watches deeply troubling events unfold.” — Adam French, Head of Consumer Finance, Moneyfacts

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