Fixed-rate energy tariffs have soared by almost £300 in just a week after the Iran war pushed up suppliers’ costs.
The “massive” price rises could continue impacting customers into next winter if the conflict raging in the Middle East continues much longer, experts have warned.
Up to 21 million customers with fixed-rate tariffs in the UK face painful price hikes once their current deals conclude, with the majority expected to end this year.
Energy companies have pulled many of their fixed-price tariffs from the market following the spike in wholesale gas and oil prices caused by the US and Israel’s war with Iran.
And the deals still available to customers have shot up in price, as UK gas and electricity providers try to adjust to expected rises in their own costs.
It could ultimately push up the energy price cap, which sets the maximum amount energy suppliers can charge households on variable tariffs.
Priciest fixed deal soars by £296 in a week
Data from USwitch shows there are now only 18 fixed tariffs available – down from 38 on 28 February, when the US and Israel began bombing Iran.
The cheapest, annual fixed tariff is now £1,656 for the average household – up from £1,509 on the day that strikes began. It means the cheapest deal has risen by £147 in a little over a week.
The increase is even more stark at the pricier end. The most expensive fixed-rate deal is £2,194 – up from £1,898 at the end of February. So the most expensive deal has risen by £296 in a week.
The most expensive fixed-rate deal has increased by £296 a week (Photo: Yau Ming Low/Getty)Ben Gallizzi, an energy expert at USwitch, said fixed-rate prices could continue to rise if the conflict rages on.
“If volatility continues, suppliers will keep updating the prices of new fixed deals to reflect the current state of wholesale prices,” he said.
“The regulator will also have to factor this into future pricing of the [regulator Ofgem] price cap from July if the turbulence remains.”
Bills could go up ‘significantly’ in 2026
Fixed energy deals offer customers certainty, as the price is locked in for an agreed period, usually 12 months.
But standard variable tariffs – linked to Ofgem’s price cap – have proved more popular. Around 33 million energy customers, roughly 65 per cent, are on variable tariffs. They allow bills to come down when costs are cheaper.
Energy bills are set to fall from 1 April following the Government’s decision to remove some green levies from household bills. The annual average bill will decrease by £117 when compared to January’s price cap.
Strike on the Bapco Oil Refinery in Bahrain amid the US-Israel conflict with Iran (Photo: Stringer/Reuters)But the price cap is widely expected to rise at the start of July due to the conflict and soaring wholesale prices.
Analysts at Cornwall Insight forecast that the average annual bill could rise by around £160 in July, from £1,641 to £1,801.
According to analysts at Stifel, if a gas price rise is sustained, then energy bills could rise from £1,641 to £2,500 in July – an increase of more than £800.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said the £160 annual increase forecast is “looking like an underestimate”, based on the further wholesale gas price rises seen on Monday.
“Bills will go up, and could go up quite significantly, which will be a worry for people who have struggled to pay,” said Francis.
“The danger is that this conflict goes into the summer, we could see the problem with rising energy prices going into next winter.”
Should customers fix their energy tariff?
Of the “big six” energy firms, five told The i Paper they were still offering some fixed-rate deals. Ovo has temporarily paused its fixed tariffs.
Francis said the energy providers’ decision to pull or increase fixed tariffs over the uncertainty in the Middle East has been “a massive change” in a short space of time.
“They are guessing how much they are going to have to pay over the length of the fixed contract. The longer this conflict goes on, the worse the [fixed-rate] deals may get.”
USwitch said that only four of the 18 fixed tariffs available either beat or are similarly priced to the April price cap.
Jonathan Bean, policy lead at Fuel Poverty Action, said: “Fixed rates offered a decent discount [compared] to the Ofgem price cap when prices were stable, but customers looking for fixed tariffs now will struggle.”
However, Natalie Hitchins of consumer group Which? said fixed rates can still protect against potential price rises ahead. She warned people not to “panic and rush into an expensive deal”.
Customers have also been urged to look at the exit fees applied to fixed-rate deals. It can cost £100 to £150 to switch providers before the end of the contract.
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Octopus said it had temporarily introduced an exit fee for fixed tariffs. “We are still offering fixed tariffs and will continue to do so for as long as we can, despite the extremely challenging situation in the Middle East,” said a spokesperson.
An Ofgem spokesperson said it was clear people were “worried” about the impact of the Iran war on energy bills. They said it was “monitoring and assessing” the impact of the “fast-moving situation” in the Middle East.
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