The UK energy price ceiling fell 7% to £1,641 today, although analysts predict a significant rise is “inevitable” when the new level is set in July.
Ofgem lowered its energy price cap from today until June 30 as a result of government measures Fall budget. In November, before the war in Iran caused a global energy shock, Rachel Reeves unveiled plans to remove most of the Renewables Obligation (RO) levy from consumers’ energy bills.
Ahead of the reduced price cap, Energy Consumers Minister Martin McCluskey said: “The action this Government has taken on the bills will ensure that the energy price cap falls from tomorrow. This reduction is locked in until the end of June, protecting millions of households with lower bills this spring.
“Tackling the affordability crisis is our number one priority. We will continue to fight the people corner during this crisis and, as the Minister of Energy has said, if there is a need to intervene, we will do so.”
‘A rise in July is inevitable’
While the reduced cap will provide relief in the short term, energy market analyst Cornwall Insight has predicted that the cap is likely to rise by almost 20% in July. In its latest forecast, the company said the price ceiling for July could reach £1,929, up from £288, due to rising wholesale gas prices due to the closure of the Strait of Hormuz.
This is a slight decrease compared to Last week’s Cornwall Insight forecastwhen it said the limit could reach £1,972.53. The decline is due to a “partial stabilization” in wholesale gas markets, following a lull in strikes on energy infrastructure in the Gulf and signals from Washington DC that the conflict may be de-escalated.
Despite this slight decline, Cornwall Insight has said that a higher price cap in July is “effectively unavoidable” due to the scale of disruption and damage to “key infrastructure” in the Middle East.
“More than a month into the conflict in the Middle East, energy markets are experiencing the kind of volatility we haven’t seen since 2022. While prices may have calmed down a bit over the past week leading up to the conflict, our forecasts pointed to a relatively stable price ceiling over the summer, now predicting increases of 18%,” said Craig Lowrey, principal advisor at Cornwall Insight.
“With Ofgem’s price cap just weeks away, damage to infrastructure and continued disruption to maritime traffic through the Strait of Hormuz limits the potential for a meaningful fall in wholesale prices. As a result, some of the increase has already been effectively baked in. A surge in July is all but inevitable, but how high prices will go remains to be seen.”
Yesterday the IMF warned that Britain would be among the countries worst affected by the energy impact of the Iranian conflict, due to its exposure to and dependence on natural gas. Britain is a major gas importer, leaving the country exposed to the international gas market, despite currently getting most of its gas from Norway rather than the Middle East.
Energy Secretary Ed Miliband suggested last week that he would try to decouple gas and electricity prices in Britain to reduce prices for households.
‘Dependence on fossil fuels makes us all poorer’
The energy shock and Cornwall Insight’s price ceiling forecasts have sparked reactions from across the UK energy sector.
Ned Hammond, deputy director of policy at Energy UK, said: “While [the lower April cap] While this is good news, a major concern is that the large increase in wholesale gas prices since the start of the conflict in the Middle East will lead to significant increases in bills later this year. The only way we can prevent more such shocks is to reduce the country’s dependence on a fuel in which we cannot be self-sufficient and whose price we cannot control.”
Deputy director of climate campaign group Uplift, Robert Palmer, said: “It is clear that Britain’s dependence on fossil fuels is making us all poorer – all except the oil and gas bosses and their shareholders who will once again profit at our expense. The only way to protect ourselves from these risks in the medium term is to double the use of renewable energy sources such as wind power and upgrade homes with solar power and heat pumps.”
The head of energy at the non-profit research institute Energy and Climate Intelligent Unit (ECIU), Jess Ralston, said: “The UK has already made huge progress towards renewables, but as the Energy Crisis Commission has warned, unless we continue that shift away from gas, whether it comes from the North Sea or not, the risk remains that bills will continue to rise.”
There are indications that the influence of gas on wholesale energy prices in the UK is declining. Ed Porter, Director EMEA and APAC at Modo Energy, shared a graph on LinkedIn today showing that there were fewer hours in March 2026 when day-ahead prices exceeded the cost of the most efficient gas-fired power station in the UK system than in the previous four years.
Conservatives call for Britain to drill
The effect of the war against Iran on price increases has led some to call for more oil and gas drilling in the North Sea. Conservative party leader Kemi Badenoch this week launched her party’s ‘Get Britain Drilling’ campaign from an oil rig, which she said would help combat rising energy prices. The campaign reflects US President Donald Trump’s campaign slogan ‘drill, baby, drill’ and would allow new permits for gas drilling.
Badenoch is not alone in calling for more extraction from the North Sea. Octopus Energy boss and green energy advocate Greg Jackson has said he supports extracting all gas from the North Sea as a “practical, pragmatic decision” as the wider economy transitions away from fossil fuels. Juergen Maier, head of state-owned GB Energy, has also said he will support extraction from existing fields.
However, there is resistance to Badenoch’s claims that gas extraction from the North Sea would help lower energy prices.
Laura Anderson, senior associate at the ECIU, said: “More drilling in the North Sea will simply not reduce bills or protect Scottish households from volatile global prices.”
Palmer said: “We can’t drill our way out of this and a few irresponsible politicians are feeding a fantasy when it comes to the North Sea. New drilling would not take a cent off our bills and would have no meaningful impact on Britain’s gas supply.”
The issue is perhaps more nuanced than this. In one long blog post this weekJohnny Gowdy, director of energy insights company Regen, explained that UK output has declined in recent decades thanks to market forces and dynamics that predate net zero policies or the renewables boom. He wrote: “While there may be reasons to increase gas production where this is physically and economically feasible, this will not reverse the decline in gas production. [gas] produce or isolate Britain from international gas prices and supply markets.”
He continued: “The short answer is that a marginal increase in UK output will not meaningfully change gas prices or protect Britain from global market shocks.” However, he said that “it still makes sense to try to boost gas production in the North Sea” as Britain will still need gas for decades to come. However, efforts to transition away from gas completely are “the most viable route to avoid fossil fuel prices and supply volatility.”
