What’s pushing wholesale gas prices to a four year high
Wholesale gas prices for the coming winter have climbed to their highest level in almost four years. UK gas contracts for October, the fourth quarter and winter delivery all struck fresh multi year highs in early September, and the reason sits a long way from any UK gas terminal.
The ongoing US and Israel conflict with Iran, which escalated at the end of February, has disrupted shipping through the Strait of Hormuz, the route that around a fifth of the world’s liquefied natural gas passes through. Less gas moving through that route makes the whole global market tighter, and UK wholesale gas prices move with it.
Why are wholesale gas prices linked to a conflict thousands of miles away?
Because gas is a global market, not a national one. The UK imports a meaningful share of its gas, and when a major shipping route for liquefied natural gas gets harder to use safely, buyers everywhere start competing harder for the cargoes that are still moving. That pushes the price up for everyone, including UK suppliers buying ahead of winter.
Benchmark wholesale gas prices have more than doubled since the conflict began, and traders are treating the uncertainty itself as a cost, sometimes called a risk premium, on top of the actual supply disruption. Add the seasonal tightening that always hits winter contracts, and you get wholesale gas prices sitting at their highest point in roughly four years.
How this shows up in your October price cap rise
Some of this is already baked into the price cap change taking effect on 1 October, which adds around £60 a year to the typical dual fuel bill. Gas costs are the biggest driver of that rise, up roughly 8%, while electricity only bills barely move.
Key takeaways
- Wholesale gas prices for winter delivery have hit their highest level in around four years.
- The main driver is the ongoing Iran conflict disrupting shipping through the Strait of Hormuz, a major LNG route.
- Benchmark wholesale gas prices have more than doubled since the conflict escalated at the end of February.
- Some of this is already reflected in October’s price cap rise, which is driven mostly by gas.
- If wholesale prices stay high, it’s a genuine risk factor for the next price cap review, though nothing is confirmed yet.
What isn’t yet confirmed is what happens after that. Ofgem’s next price cap period runs from January, and it’s set using wholesale prices from the months leading into it. If wholesale gas prices stay elevated into the new year, that’s a real risk for the next review, though nothing is decided or announced yet.
Will my bill go up again after October?
Nobody can say for certain, and treat anyone who claims otherwise with suspicion. What’s true is that the underlying cost pressure suppliers are buying against right now is higher than it’s been in years, purely because of what’s happening with global shipping routes, not anything to do with UK demand or usage.
That uncertainty is exactly why fixed deals are worth a look now rather than waiting to see what January brings. A fix locks in today’s rate regardless of what wholesale gas prices do next, which cuts both ways, but protects you if the current pressure continues.
What can you actually do about it
Check whether a fixed tariff beats the price you’re currently paying, especially if you’re on your supplier’s standard variable rate. Ofgem has pointed out that some fixed deals currently sit £100 or more below the new October cap, an estimated saving of around £173 a year for households where that gap applies.
If you’re already fixed, there’s genuinely nothing to do here except carry on. Your rate doesn’t move regardless of what wholesale gas prices are doing. Roo’s view: this is one of those rare moments where doing nothing, if you’re already locked in, is actually the right call.
If you’re not fixed, this is worth ten minutes now rather than a scramble in December when everyone else has had the same idea.
It’s also worth keeping half an eye on how the winter plays out rather than checking once and forgetting about it. Restocking gas storage across Europe has been harder and more expensive than usual this year, and that’s exactly the kind of background pressure that can keep wholesale prices elevated for longer than a single news cycle suggests. A five minute check in November costs you nothing and might catch a better fixed rate before the next cap review.
Frequently asked questions about wholesale gas prices
- Why have wholesale gas prices hit a four year high?
- Mainly because the ongoing Iran conflict has disrupted shipping through the Strait of Hormuz, a major route for global liquefied natural gas, tightening supply and pushing up prices worldwide.
- Do rising wholesale gas prices affect my bill straight away?
- Not instantly. Suppliers buy ahead, so higher wholesale gas prices tend to show up in the price cap a few months later, as they already have in October’s rise.
- Will the January 2027 price cap rise because of this?
- It’s a genuine risk if wholesale gas prices stay elevated, but nothing is confirmed. Ofgem sets each cap using wholesale prices from the run up to that period.
- Should I fix my energy tariff because of rising wholesale gas prices?
- It’s worth checking. A fixed deal protects you from further wholesale driven rises, though it also means missing out if prices ease. Compare current fixed rates against the new cap.
- Does electricity cost more too because of wholesale gas prices?
- Some, since gas still sets electricity prices at the margin in the UK, but the effect is much smaller than on gas bills directly.
None of this is a reason to panic about your next bill. It’s a reason to check your options with clear eyes, especially if you’re still sitting on a standard variable tariff. Our guide to the energy price cap explains how the cap itself is calculated, and our guide to switching energy supplier covers the actual process if a fixed deal looks better.
You can read more on the market conditions driving this in Al Jazeera’s coverage of the risk premium UK households are facing.
