Britons face ‘risk premium’ for energy as US-Israel war on Iran intensifies

Published On 1 Sep 20261 Sep 2026.

Key points

• A household using a regular level of energy will pay regarding 60 pounds ($80) a year more.
• While the move on tax gives individuals "room to breathe, it doesn't fix the fundamentals", Ahmed Tabaqchali, a non-resident senior fellow at the Atlantic Council, informed Al Jazeera.
• Iran shut the strategic waterway not long after the initial US-Israeli strikes on Tehran in late February, triggering a global energy crisis.
• Ozan, 20, a business owner in northeast London, remarked that "it's getting more and more difficult to absorb the rises" for small business owners.
• The fog of war is still there, and who knows when it will blow away, remarked Andrew, who requested that his surname be withheld for privacy.

London, United Kingdom – Andrew, a 70-year-old retiree from the eastern English city of Norwich, had enrolled months ago in a fixed-rate energy plan for 18 months, learning from earlier cost shocks caused by wars. "I guess I saw this coming, " he informed Al Jazeera.

Days ago, Ofgem, the energy regulator for England, Scotland and Wales, confirmed a 4 percent rise of the energy cost cap from October 1, 2026, a result of the sharp rise in wholesale gas costs due to the United States-Israel war on Iran.

"The situation doesn't look any clearer. The fog of war is still there, and who knows when it will blow away, " remarked Andrew, who requested that his surname be withheld for privacy.

Notably, the end of his fixed-rate plan is not something he likes to think regarding.

"I don't think there's going to be clarity, " he remarked. "I can't see that the current state of geopolitics will allow for any resolution. I'm starting to think, if it's not one conflict zone, it will be another."

According to Ofgem, 35 percent of households in England, Scotland and Wales are on similar, fixed-rate energy intends, and will not be immediately affected by the Ofgem rate cap growth.

Most, nevertheless, will face higher bills in the winter, an went on blow to a nation already struggling against the backdrop of a continued cost-of-living crisis.

Meanwhile, a household using a regular level of energy will pay regarding 60 pounds ($80) a year more.

Notably, the UK administration, alongside the rise, confirmed a tax cut on monthly electricity bills as part of a wider effort to shield residents from the increasingly stark economic impacts of the Iran war as winter approaches. The tax cut is observed to last until the end of the 2027 financial year, but both experts and everyday residents are not so sure that costs will be under control by then.

"We are not going to see a return to normality as far as the Strait of Hormuz is concerned. One way or the other, whatever end-game with the US and Iran, there is now a change to the status quo, " remarked Tabaqchali. This person has worked in capital markets for more than 25 years. Volatility is not a temporary concern, he remarked.

"As long as the United Kingdom relies on energy imports, we are going to be impacted by geopolitics, " remarked Jack Burt, a PhD candidate at the University of Cambridge, researching novel forms of energy storage.

Before the Iran war, roughly one-fifth of the world's oil and liquefied natural gas (LNG) passed through the Strait of Hormuz, the only route connecting the Gulf to the ocean. Iran shut the strategic waterway not long after the initial US-Israeli strikes on Tehran in late February, triggering a global energy crisis.

While predicting that household gas bills would rise, shortly after those initial strikes, the UK House of Commons Library published a briefing noting that the Bank of England would probable scrap intends to lower interest rates.

"Higher energy costs are likely to result in the UK economic activity weakening, " the report remarked.

Ofgem's move is the latest development in the ongoing energy crisis stemming from the war.

Wholesale rates have risen by 11 percent over the past three months, observed Ofgem, with Neil Kenward, the body's director general for markets, underlining that "high international gas prices are continuing to drive energy costs in the UK".

While the tax cut applies to electricity bills, meaning households that do not apply gas will fare better than those that do, the cost cap applies to gas and electricity. A 'risk premium' for energy supply.

While diplomatic efforts in the Gulf region have focused on keeping the Strait of Hormuz open, US attacks on Iran over the weekend – the first in a month – threaten continued destabilisation.

"The consumer is going to be paying a 'risk premium' for energy supply, " observed Burt.

When monthly energy bills hit all-time highs, the UK moved away from gas coming through Russian pipelines "and became much more reliant on other suppliers of liquid natural gas, mostly coming from the Middle East", he stated, after the 2022 full-scale Russian invasion of Ukraine.

"Ultimately, the customer is also suffering, leading to less disposable income, meaning less spending."

As the rates of everyday goods continue to rise, last week, the Centre for Economics and Business Research forecast that by the end of 2027, the average UK household's real spending power will be reduced by 2, 400 pounds ($3, 200).

After a quarterly schedule, ofgem's cost cap will be reviewed again in January. But experts are predicting a continued rise in rates, painting a bleak picture for the UK's energy sector.

In short, britons face 'risk premium' for energy as US is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.