Experts have warned that households could be facing further pain on energy bills as oil prices surge above 100 dollars a barrel and UK gas prices reach a near four-year high.
Traders in the financial markets were reacting to attacks on Iranian oil tankers and concerns about further disruptions to supply amid ongoing fighting in the Middle East.
US officials said on Tuesday night that multiple tankers had been struck in retaliation to more attempted missile attacks on a Navy warship.
The news sent the price of Brent crude oil up by nearly 3% to around 100.50 dollars a barrel on Wednesday afternoon.
The last time prices went above the 100 dollars a barrel mark was in late July.
Furthermore, UK natural gas prices were up by about 3% to around 195p per therm, which is a unit of heat energy – hitting the highest level since December 2022.
The latest strikes in the Middle East show fighting between the US and Iran continues to escalate after more than six months of war, weighing on hopes among investors that a peace deal can be reached this year.
Rising oil costs and disruption to supplies are also influencing fuel prices, which have gone up further in recent days.
The latest data from the RAC showed the average price of petrol has increased by 5p a litre in the last week to reach 167.17p, and diesel has risen by the same amount to 188.63p.
The last time unleaded petrol prices were that high was four years ago, according to the motoring group.
Furthermore, experts warned that the latest surge in wholesale prices could feed through into consumer energy bills in the winter.
Ofgem’s energy price cap will rise by 4% in October, and analysts are predicting a bigger hike to the price cap in the new year.
Andrew Goodwin, chief UK economist for Oxford Economics, said: “The increase in wholesale gas prices has more than offset the saving from the Government removing VAT from electricity bills between October and March.
“We think the price cap could rise by another 13% in January – wholesale prices are currently well above the level of the previous observation window, and our commodities team expect them to remain high in the near term.”
Simon Francis, who coordinates the End Fuel Poverty Coalition, said: “The wholesale cost of gas has hit a high not seen since December 2022, while heating oil prices have also surged upwards again.
“The Ofgem price cap for January is being calculated on prices like these, which means it could be brutal for households already struggling.
“Those who use heating oil or are on some heat networks and are not on the price cap may see increases even sooner.”
He called on the Government to provide targeted support for struggling households and those in energy debt and “back the long-term energy efficiency measures that can protect the public from future market volatility”.
Simon Cran-McGreehin, head of analysis at the Energy and Climate Intelligence Unit (ECIU), said gas prices had not fully recovered from Russia’s invasion of Ukraine in 2022, while the Iran war meant households and businesses were facing another winter of rising bills.
“Only by getting off gas and oil can we protect ourselves from volatile international fossil fuel markets,” he said.
Susannah Streeter, chief investment strategist at Wealth Club, said: “Far from showing signs of resolution, the conflict in the Middle East appears to be becoming more entrenched, creating chronic supply concerns around crude and gas, while intensifying trade battles threaten to push up the cost of goods just as central banks are trying to get inflation under control.
“Given the sustained impact of higher energy prices, the worry is that firms will have little choice, other than to raise prices, which risks creating another inflationary spiral.”
