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?

Russia–Ukraine crisis

Gas: 15.3p · Elec: 41.4p/kWh

August 2022

Gas +750% · Elec +560% vs Apr 21

Iran conflict escalation

Gas: 4.6p · Elec: 10.0p/kWh

March 2026

Gas +85% since Dec 25

Pre-crisis baseline · Gas: ~1.8p · Elec: ~6.3p/kWh

Russia–Ukraine crisis

Gas: 15.3p · Elec: 41.4p/kWh

August 2022

Gas +750% · Elec +560% vs Apr 21

Iran conflict escalation

Gas: 4.6p · Elec: 10.0p/kWh

March 2026

Gas +85% since Dec 25

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.

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.

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.

Fixed-rate contract

Flexible contract

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