The Iran conflict has caused significant human suffering. It's wider impact includes disruption to the world’s energy supply and shipping routes. Energy prices have increased as countries compete for alternative supplies. The UK imports relatively little energy from the Middle East. However, it's still exposed to these higher global prices.

The charts below tell the story of how reliant the UK is on global energy supplies − and why it matters for the UK economy. They show how UK households are protected from higher natural gas and electricity prices until July 2026, while higher oil prices have already pushed up what consumers pay on filling station forecourts. Energy prices could also rise even further in the autumn if the conflict continues and as seasonal demand increases. Even at current prices, which have eased slightly, UK inflation will be affected. We expect it to rebound to 3.5–4% this year as higher household energy bills and input costs work through supply chains.

The Middle East produces around 30% of global oil and just under 20% of natural gas. The Strait of Hormuz, the strategic maritime passage that transports most of the region’s energy exports, alone accounts for 25% of global seaborne oil trade and 20% of global liquefied natural gas (LNG) exports. There’s already been notable long-term damage to energy infrastructure in the region. This will impact supply and keep energy prices higher for longer, even if April’s ceasefire proves permanent.

The Strait of Hormuz was virtually shut for most of March 2026. Its closure threatens around 20% of global oil and LNG supply, even as countries like Saudia Arabia try to divert as much oil as possible through the Red Sea. Indeed, the final tankers that exited the Strait before the conflict will all arrive at their destinations in April 2026. Once that flow dries up, supply constraints will bite harder if the Strait of Hormuz isn’t re-opened or any ceasefire is broken.

The UK is a net importer of energy, with around half of its needs being met by imports. About 12% of its oil comes from the Middle East and most of its gas imports from pipelines with Norway. LNG imports, which the Middle East is an important global supplier of, account for around 15% of the UK’s gas supply.

LNG imports have become an increasingly important part of the world’s energy mix. This makes the UK more vulnerable to the economic effects of the conflict in the Middle East. Most of the supply comes from the US, but as a net importer the UK is still exposed to sharp movements in prices as it joins other countries responding to supply shortages by buying from elsewhere.

A lack of LNG supply may not be too much of a worry now because LNG imports tail off as the months get warmer. However, if shipping through the Strait of Hormuz isn’t fully restored by the autumn when demand picks back up, energy prices could rise higher due to supply shortages.

The latest conflict has led to oil prices increasing by over 60%, which is feeding through to pump prices quickly and preventing UK inflation from falling back to target. Refined products, such as diesel and kerosene, have risen by even more, which means oil products could add as much as 0.5ppts to inflation between February and April 2026.

The UK produces only around a third of its electricity from natural gas, with most of its electricity generated by renewables. As mentioned earlier, only 15% of the UK’s gas supply is LNG, so LNG is used for roughly only 4% of electricity generation. This means blackouts are unlikely, but as a global price-taker, the UK is still susceptible to rising prices.

In fact, because natural gas is the most expensive input in electricity generation it sets the price of electricity nearly all the time. Natural gas prices have jumped by around 70% since the start of March 2026, but remain subdued compared to 2022. If this increase is sustained, it will result in big hikes in energy bills for firms and households, although it would take slightly longer to filter through than oil prices.

The good news is that households won’t see higher energy bills until July when the Ofgem energy price cap is next reset. Energy bills fell by 6.7% in April 2026, but we think the cap could be raised by 15−20% in July based on current energy price futures.

Higher energy bills mean that instead of falling to 2% in 2026, inflation will probably plateau before rising to 3.5−4% in the second half of the year. If tensions flare up again, then energy prices may rise even higher and take inflation above 5%.

Ultimately, tensions in the Middle East have already driven sharp increases in energy prices. For now, the immediate impact will come through higher oil prices. However, a big hike to the energy price cap in July is almost certain. This will lift inflation further. The extent of the economic impact will ultimately depend on whether the temporary ceasefire leads to a permanent end to the conflict and how long trade flows are disrupted. In any case, energy prices are unlikely to return to pre-conflict levels due to the damage to the region’s energy infrastructure. This will complicate the inflation outlook for the Bank of England this year.

Our latest UK Economic Outlook update explores more of the impact of the latest energy-price shock on firms, households, the UK labour market and interest rates.

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