The price of UK natural gas has surged by almost a quarter following the latest attacks by Iran on a gas hub in Qatar, heightening fears about major disruption to global supplies.
Natural gas futures – contracts for buying the commodity in the coming months – have been trading over the past few days at between 125 and 132 pence per Therm (a unit of heat energy), but slowly rose on Wednesday to close at around 140p.
But as trading hours opening on Thursday, this rocketed to 174p – an increase of 24 per cent. It quickly tailed back slightly to 169p as of 8am GMT, but one industry expert warned the developments will be a “major concern to bill payers” across Britain.
It came after Qatar said on Thursday that Iranian missile attacks had hit its liquified natural gas field Ras Laffan, “causing sizeable fires and extensive further damage”. This followed reports that Israel launched an attack against Iran’s South Pars gas field.
Britain imports a significant percentage of its natural gas and, following a cold winter, Europe is expected to have lower reserves than usual.
Government data from 2024 shows natural gas made up a third (33 per cent) of the overall energy supply, though this may now be slightly lower as the level of renewables (then 42 per cent) in the mix continues to rise. While there is a domestic supply of gas from the North Sea, the UK also imports much from Norway and other areas of Europe.
European gas prices also rose by more than 20 per cent into Thursday.
Comparison website Uswitch said more than 20 fixed deals have been removed from the market by energy firms across Britain in the past three weeks, a response of rising wholesale costs which will send the energy price cap higher in summer. Fixed energy tariffs protect consumers from rising prices or energy price shocks.
The price cap is expected to rise to around £1,827 in July, per Cornwall Insight. Ofgem set the price cap.
Meanwhile, oil prices have spiked as attacks on energy facilities in the Middle East have stepped up.
The price of Brent crude oil was rising by about 7 per cent to cross 114 US dollars a barrel on Thursday morning, meaning it was closing in on the highest level since the conflict escalated at the end of February.
Discussing the surging cost in oil as a result of the conflict, Chris Bryant, the minister of state for trade, said the situation has developed into a “really big moment for the UK economy” and urged a continued push toward green energy to reduce reliance on fossil fuels and their volatile pricing.
Mr Bryant said that chancellor Rachel Reeves “will look at what we can do about the fuel duty cap” and added that time would show decisions taken now to be right for the long term. “The biggest message I take away from everything that’s happening in the Gulf is, we need to make sure that we are not so dependent on oil and gas prices,” he said.
“The key part of that is making sure that we transition the UK economy to renewables.
“In ten years’ time, I think people will say this was a really big moment for the UK economy and the UK Labour government got it right.”
The Common Wealth thinktank have released a report suggesting UK household energy bills could go down by £200 if gas was no longer used to set pricing in the way it is now and urged the government to “remove the price setting function of gas from the electricity market.”
Jess Ralston, head of energy at the Energy and Climate Intelligence Unit (ECIU), said: “This will be a major concern to bill payers, many of who are still carrying debt from the last gas crisis when Russia invaded Ukraine. That led to taxpayers having to step in essentially subsidising gas for millions of homes to the tune of tens of billions. And let’s be clear: trying to squeeze more gas out of the North Sea has no real impact on the price households pay because its set by international markets and these kind of world events caused by foreign actors like Putin.
“Put simply, if you want to insulate yourself from these kind of price shocks, use less gas.
“British wind and solar farms lower our dependence on foreign gas, as do net zero technologies like electric heat pumps and this helps with bill stability. British wind power lowered wholesale prices by a third last year. These are permanent solutions, whereas the North Sea is a mature basin running out of oil and gas, quicker drilling means it runs out quicker.”
After the latest attacks, US President Donald Trump said he “knew nothing” of Israel’s strike and that he did not want to authorise “this level of violence and destruction”. But he also pledged to “massively blow up the entirety” of Iran’s South Pars gas field if the nation attacks Qatar’s facilities again.
Qatar’s state-backed energy company Qatar Energy had halted production of liquefied natural gas at its sites at the beginning of the month because of attacks on its facilities.
Additional reporting by PA