How the Iran-Israel conflict could hike your energy bills ...Middle East

The Iran-Israel conflict could destabilise the global economy, hiking up the price of oil and increasing energy costs.

Israel launched a wave of attacks on Iran in the early hours of Friday morning, targeting senior military commanders, nuclear scientists and nuclear sites but reportedly also killing civilians.

In response, Iran sent a barrage of missiles into Israeli air space, killing at least three Israelis, while five Palestinians were killed in a missile strikes from the Iran-aligned Houthi militant group.

As the countries traded airstrikes, oil prices soared on Friday to their highest levels since 2022, threatening global economic turbulence.

The crisis looks set to continue as Iran threatens further attacks – including on UK, US and French bases.

Instability caused by the conflict saw oil prices skyrocket as trading closed on Friday.

Brent crude futures, a benchmark for oil pricing, settled at $74.23 a barrel, up 7 per cent, after earlier soaring more than 13 per cent.

The US oil benchmark, West Texas Intermediate crude, finished at $72.98 a barrel, up 7.6 per cent after jumping at one stage to 14 per cent.

Both marked their largest single day jump since Russia’s invasion of Ukraine caused a spike in energy prices.

Oil prices hit their highest level in nearly five months (Photo Ufuk Celal Guzel/Getty Images)

Prices at the pump

The first way this could filter through to consumers is in the price of petrol.

Iran is a member of the Organisation of the Petroleum Exporting Countries (OPEC), producing around 3.3 million barrels of oil and fuel per day and exporting over 2 million.

If further attacks damage Iranian oil infrastructure, this will impact the global supply and increase prices at the petrol pump.

Israeli officials are briefing that Iran’s oil network could come under attack, which could have a devastating impact. A source told the Times of Israel the response would aim to cause “significant financial damage”.

Other countries may be able to plug the gap if needed, with other OPEC countries and their allies holding roughly an equivalent amount of spare capacity, analysts told Reuters.

Emergency and rescue workers inspect a scene of heavily damaged buildings after an overnight strike on 14 June 2025 in Rishon LeZion, Israel.(Photo: Amir Levy/Getty Images)

Under a worst-case scenario, analysts at investment bank JPMorgan said that closing the Hormuz Strait or a retaliatory response could lead to prices surging to the $120 to 130 (£88.70 to £96.09) a barrel range, nearly double their current base case forecast.

Mohamed El-Erian, president of Queens’ College Cambridge and advisor to insurance group Allianz, said further instability could result in petrol price increases.

Heating bills this winter

Gas prices have also risen after strikes were traded this week.

The impact may not filter through to households at all, given the way the market works, including the role of the regulator, in capping prices.

However, UK consumers were impacted significantly by higher energy prices that followed the breakout of the war in Ukraine, which disrupted global energy markets, causing a surge in gas and electricity prices.

Many people heat their homes with gas, and in the UK electricity prices are set in relation to the gas price. If the flow of liquified natural gas (LNG) from the region is impacted, experts warn this could effect costs.

Britain buys some of its gas from Qatar, although its purchases of LNG have fallen dramatically from recent highs.

Other economists have cautioned that rising oil and gas prices, which lead to economic uncertainty, could influence future decisions on interest rate cuts or even tax rises being considered by Chancellor Rachel Reeves for later this year.

“For the average consumer, they will be looking at more income uncertainty. They will be looking at higher petrol prices, and in the UK, they’re probably looking now at higher risk of taxation in October,” El-Erian told the BBC on Friday.

Could other products rise in price?

Experts fear that the Iran-Israel conflict could see renewed attacks on ships, disrupting global trade and increasing product prices.

Last year, the Houthi rebel group launched a wave of drone attacks on ships in the Red Sea, killing sailors and causing chaos for global shipping, before a ceasefire was agreed between the US and the Houthis last month.

Many ships took lengthy detours to avoid the areas, causing some delays and an increase in shipping costs.

The boss of Tesco, Britain’s biggest supermarket chain, last year warned of price hikes due to the crisis, and any further escalation in the region could have a similar knock-on effect.

The Combined Maritime Force said that shipping was so far was continuing through the Strait of Hormuz – a vital trade passage – but that some shipowners were looking to avoid the region.

Burcu Ozcelik, senior research fellow in Middle East security at Rusi, said that “Pandora’s box has been cast wide open” through Israel’s attack.

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“The fragile US-brokered ceasefire with the Houthis in Yemen now hangs in the balance – potentially unravelling if the group is mobilised to act on Iran’s behalf,” she said.

“Any such move would reverberate far beyond Yemen, threatening maritime security in the Red Sea and risking direct entanglement of the US and UK in a widening regional conflict.”

The first ship sunk by a Houthi attack, in early March last year, was a British-owned vessel, and the UK has been involved in airstrikes on Houthi bases in Yemen.

Farea Al-Muslimi, research fellow at Chatham House, predicted that strikes in the Red Sea would likely resume, saying that the Houthis were “known for their recklessness”.

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