Household energy bills in Great Britain ‘could rise to almost £2,000 a year’ amid Iran war shock

Household energy bills in Great Britain could soar by more than £330 a year to almost £2,000 from this summer after the war in Iran pushed the UK’s gas market past three-year highs.A typical combined household gas and electricity bill is now forecast to reach £1,972 a year from July under the UK government’s quarterly price cap, according to analysis by Cornwall Insight, an energy consultancy.The fresh forecast has soared above an estimate from two weeks ago when the consultants predicted, after only five days of war in the Middle East, that the price cap could climb to £1,800 a year from July from £1,641 a year under the April to June cap.The newly forecast 20% increase in household energy costs was fuelled by a rise in European gas prices this week after a significant escalation in the conflict during which some of the region’s most important infrastructure was targeted for the first time since the conflict began three weeks ago.Gas prices in Europe rose 30% on Thursday after Qatar confirmed that missiles caused extensive damage at the world’s biggest processing facility for seaborne gas, which could take up to five years to repair.Europe’s gas markets have eased on Friday but prices remain twice as high since the start of the war. The market price for UK gas delivered next month also eased, down 2% to 153p a therm on Friday from highs of 180p on Thursday, but also remain almost double the level before the Iran war began.Meanwhile, Brent crude traded at about $107 (£80) a barrel after falling from highs of $119 on Thursday. The international benchmark remains almost 50% higher than before the conflict began.The £1,641 cap for April to June – set by the industry regulator for Great Britain, Ofgem, represents a £117 cut from the January-March cap for millions of households, but prices are then expected to rise sharply from the summer.Households also face the prospect of higher mortgage costs, after the Bank of England kept interest rates on hold on Thursday but signalled it could be forced to increase borrowing costs in the coming months. The central bank kept rates on hold at 3.75%.The risk of a steep increase in household energy costs has emerged as the world’s energy watchdog urged global governments to consider Covid-style emergency measures to help reduce energy use.The International Energy Agency said several governments are already considering policies to conserve energy. These include asking people to work from home where possible to reduce commuting and incentivising the use of public transport or sharing vehicles when travel is unavoidable.The Paris-based agency has also suggested that governments could lower highway speed limits by at least 10km/h (6.2mph) to reduce fuel use for passenger vehicles and freight.The IEA’s energy-saving measures focus primarily on road transport, which accounts for about 45% of the world’s oil demand. However, the agency has also set out plans to conserve liquefied petroleum gas in transport and heavy industry in developing countries where LPG is heavily used by households.