How Is the Iran Conflict Affecting UK Energy Prices?
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Energy market update

How Is the Iran Conflict Affecting UK Energy Prices?

April 2026 Purely Energy

Military strikes against Iran by Israel and the United States have sent shockwaves through global energy markets. Rather than stabilising the Middle East, the escalation has raised serious concerns around the Strait of Hormuz, the narrow shipping lane between Iran, the UAE, and Oman that carries around 20% of global oil supply and a significant share of liquefied natural gas (LNG). As shipping through the strait slows and risk premiums climb, wholesale energy prices across Europe have surged. Gas prices have risen by as much as 60%, making this the most severe energy price shock since Russia's invasion of Ukraine in 2022.


For UK businesses, the question is simple: how will the Iran conflict affect energy rates in Britain, and what steps can they take now?

UK wholesale energy prices (p/kWh)
Source: ICIS · M+1 forward monthly averages
NBP Gas M+1
UK Baseload Electricity M+1

Russia–Ukraine crisis

August 2022

Gas +750% · Elec +560% vs Apr 21

Iran conflict escalation

March 2026

Gas +85% since Dec 25

Russia–Ukraine crisis

August 2022

Gas +750% · Elec +560% vs Apr 21

Iran conflict escalation

March 2026

Gas +85% since Dec 25

Key context

While the Iran escalation has triggered the sharpest upward movement in energy prices since 2022, wholesale rates remain well below crisis-era peaks. Gas M+1 at 4.14p/kWh is roughly one-quarter of the August 2022 peak (15.29p/kWh), and electricity at 9.33p/kWh is less than a quarter of its peak (41.37p/kWh). However, gas has risen 85% from its December 2025 level of 2.48p/kWh — and because UK electricity generation depends heavily on gas-fired power stations, electricity prices follow. For businesses, the concern is not where prices sit versus 2022, but the speed and direction of the current trajectory.

Price comparison at key moments
Period Gas M+1 Elec M+1
Apr 2021 1.80p 6.25p Pre-crisis baseline
Aug 2022 15.29p 41.37p Russia-Ukraine peak
Feb 2024 2.16p 6.00p Post-crisis low
Dec 2025 2.48p 8.23p Pre-Iran baseline
Mar 2026 4.59p 9.99p Iran conflict peak
Apr 2026 4.14p 9.33p Latest (10 Apr)

How UK Wholesale Energy Prices Are Responding

UK households are currently protected by the Ofgem price cap, but that shield only lasts until the end of June. If global pressures persist, energy bills are expected to rise sharply in July. Cornwall Insights forecasts that the average annual household energy bill could reach £1,973, an increase of £332. The impact is already visible at the pump.


As of 23rd March, RAC figures show diesel prices climbing from 142.4p to 169.8p per litre, while petrol has risen from 132.9p to 146.4p per litre. Because a large share of UK electricity is generated from gas, rising wholesale gas prices feed directly into electricity costs. With energy prices already elevated, continued upward pressure is unwelcome news for businesses already managing tight margins.

UK Fuel Prices 2021-2026 | Purely Energy
UK fuel prices, pence per litre (2021 - 2026)
Source: RAC Foundation (approximated)
Petrol
Diesel
2022 peak (Russia-Ukraine)
Petrol 191.0p
Diesel 199.0p
All-time highs at the pump
Current (Iran conflict)
Petrol 146.4p
Diesel 169.8p
As of 23 March 2026
Increase since conflict
Petrol +13.5p
Diesel +27.4p
Up from 132.9p and 142.4p

Key context

Diesel has been hit hardest, rising 27.4p per litre since conflict began, compared with 13.5p for petrol. While neither fuel has reached the record highs set during the 2022 Russia-Ukraine crisis, the pace of increase is notable. Diesel at 169.8p is now approaching levels last seen in late 2022, and any further escalation in the Strait of Hormuz would put additional upward pressure on both fuels. For businesses with fleets or high mileage, these increases translate directly into higher operating costs.

What UK Businesses Can Do to Manage Rising Energy Costs

Global shocks like the Iran conflict are outside any business's control, but how they respond is not. Rising wholesale costs feed through into higher commercial energy rates quickly, so businesses approaching a contract renewal should act early to make sure they are on the right deal.


A fixed-rate energy contract can offer valuable price certainty by locking in a rate and shielding against further global disruption. A flexible contract may suit businesses better if tensions ease and prices fall, though this approach requires active market monitoring. The right choice depends on a business's size, financial stability, and appetite for risk.


Either way, reviewing energy usage now is one of the smartest steps any business can take. Even modest reductions in consumption can make a noticeable difference over time, helping businesses stay resilient regardless of what happens on the global stage.

Which contract suits your business?
The right choice depends on your view of where the market is heading — and your appetite for risk.
If you think prices will rise

Fixed-rate contract

Lock in today's price for the full term
↗ Best when you expect the conflict to escalate or persist, pushing wholesale rates higher. Locking in now protects you from further increases.
+ Price certainty through further shocks
+ Easier budgeting and forecasting
+ No active market monitoring needed
− Locked in if prices fall back
If you think prices will fall

Flexible contract

Your price moves with the wholesale market
↘ Best when you expect tensions to ease and prices to drop back. You stay exposed to the market and benefit from any downward correction.
+ Benefit directly if prices fall
+ Ability to lock in later at a better rate
− Fully exposed to further price spikes
− Requires active monitoring or broker support

How Can Purely Help?

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For more information. Contact us on 0161 521 3400 or email us at info@purelyenergy.co.uk 


Written By Elizabeth Heverin and Edited by Faith Labong at Purely Energy.