From July 1, 2026, UK households are facing an average 13% increase in their energy bills, pushing the typical annual cost from £1,641 to £1,862. This rise comes amidst heightened geopolitical tensions in the Middle East, specifically Iran's recent warning against unauthorised crossings in the Strait of Hormuz.
The Islamic Revolutionary Guard Corps (IRGC) declared on June 25, 2026, that the 'only authorised transit routes through the Strait of Hormuz are those designated by the Islamic Republic of Iran,' deeming any deviation 'unacceptable and extremely dangerous.' This declaration directly impacts a critical global energy chokepoint, responsible for the transit of approximately one-fifth of the world's oil and a quarter of its liquefied natural gas (LNG).
"The only authorized route for passage through the Strait of Hormuz is the route announced by the Islamic Republic of Iran. Any crossing without authorization is unacceptable and extremely dangerous."
— Iran's Islamic Revolutionary Guard Corps (IRGC), June 25, 2026
The Strait's significance cannot be overstated. In the first half of 2025, an average of 20.9 million barrels of oil per day flowed through it, representing about 20% of global petroleum consumption. Any disruption, or even the threat of one, sends ripples through global energy markets.
We've seen this before. Following the outbreak of the US-Israeli conflict with Iran in February 2026, Brent crude oil prices surged from around $70 a barrel to temporary peaks exceeding $100. While oil prices have since returned to pre-war levels on rising Middle East supply, the latest warning from Iran introduces renewed uncertainty.
The UK Economic Impact
For the UK, the consequences are tangible. Energy accounts for about 8% of the Consumer Prices Index (CPI) basket. In May 2026, UK energy prices increased by 7.4% year-on-year, marking the largest rise since May 2023. While the overall CPI inflation rate remained at 2.8% in May 2026, it is widely expected to climb later in the year as these higher energy costs filter through the economy.
The projected 13% increase in the Ofgem price cap for July 1 is not the only concern. Forecasts suggest a further 2% increase in the price cap for the final quarter of 2026. The cumulative effect of these rising energy prices could leave a typical working-age household in the UK approximately £480 worse off this year compared to pre-conflict forecasts.
What this means for you
With energy costs rising, reviewing your household budget is prudent. Consider whether your current energy tariff remains competitive, though options may be limited under the price cap. For any savings you might have, ensure they are working as hard as possible. Cash ISAs offer a tax-free haven for your savings, meaning all interest earned is yours, up to the annual allowance. For first-time buyers, a Lifetime ISA provides a 25% government bonus on contributions up up to £4,000 per year. For larger sums held in standard savings accounts, remember that interest above your Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate) is subject to tax. Exploring these tax-efficient wrappers can help mitigate the impact of rising costs.
But there are risks
While Iran's warning is a serious development, it's worth noting that oil prices have previously shown resilience. One Al Jazeera report indicated that oil prices had returned to pre-war levels due to rising Middle East supply. This suggests that market dynamics can shift rapidly, and the long-term impact of this specific warning might be mitigated if supply remains robust or if diplomatic solutions are found. However, the immediate effect on the Ofgem price cap is already set.
What Happens Next
The Ofgem energy price cap increase of 13% will take effect from July 1, 2026. Households should anticipate higher bills from this date. Further forecasts indicate another potential 2% increase in the price cap for the final quarter of 2026, suggesting continued pressure on energy costs through the end of the year.
Where to Get Help
For independent advice on managing your finances, consider speaking with a qualified financial adviser. Organisations like Citizens Advice and the MoneyHelper service also offer free, impartial guidance on budgeting and energy costs.
Sources
- Iran's Islamic Revolutionary Guard Corps (IRGC) — Statement on Strait of Hormuz, June 25, 2026 (as reported by Al Jazeera)
- Al Jazeera — Iran warns against Hormuz crossings without authorisation
- Al Jazeera — IRGC warns against new Hormuz route for ships: What we know
- Al Jazeera — Oil prices back to pre-war levels on rising Middle East supply
- UK Consumer Prices Index (CPI) — May 2026 data (as reported in research)
- UK Energy Inflation — May 2026 data (as reported in research)
- Ofgem — Projected energy price cap increases (as reported in research)
This is not financial advice. Seek independent financial guidance. Interest on standard accounts may be subject to tax above your Personal Savings Allowance.