Price cap rise looms as Iran conflict tightens supply

The price cap will rise again in July, the fourth increase in eighteen months, and this time the culprit is not domestic policy but a tanker in the Strait of Hormuz. Business Live reports that households will learn the new level in late May, with analysts projecting an annual increase of £60–£80 on a typical dual-fuel bill. The trigger: Iran’s military escalation in the Gulf, which has pushed European wholesale gas prices up by roughly a fifth since March.

As reported by Business Live, the cap is calculated using a formula that tracks wholesale gas and electricity costs over a six-month window. The latest data, covering February to July, will reflect the post-March spike. Ofgem’s announcement is due on 27 May.

Why the Iran conflict hits your bill directly

The UK gets less than 5% of its gas directly from the Middle East, but the market is global. When a major chokepoint like the Strait of Hormuz is disrupted, LNG cargoes get rerouted, Asian buyers bid up spot prices, and European wholesalers pay more. The UK’s gas-linked electricity system means that even homes with electric heating are exposed. The result: a typical 3-bed semi using 12,000 kWh of gas and 2,900 kWh of electricity per year will see its annual bill climb from roughly £1,850 to around £1,920–£1,930 under the new cap, according to Cornwall Insight estimates cited in the report.

What this misses, the structural problem

But the cap is a sticking plaster. What the July rise really exposes is the UK’s continued dependence on volatile global gas markets. Since the 2022 crisis, the government has accelerated renewables deployment, wind and solar now supply over 40% of electricity, but gas still sets the marginal price for most of the grid. Every geopolitical tremor in the Gulf, every cold snap in Asia, every pipeline outage in Norway feeds through to British bank accounts. The Energy Security Secretary has promised a review of the cap formula, but no concrete changes have been tabled.

What a homeowner can do now

The immediate fix: check whether a fixed tariff beats the July cap. Several suppliers are offering fixes at 5–8% below the current cap, according to comparison sites. But the smarter, longer move is to cut your gas dependence. The Boiler Upgrade Scheme still offers £7,500 towards an air-source heat pump; a typical installation costs £12,000–£15,000, leaving the homeowner to find £4,500–£7,500. With the July rise, the payback period shortens by roughly six months. Insulation, cavity wall, loft, or solid wall, reduces the heat loss that makes every kWh of gas more expensive. The Great British Insulation Scheme provides free or discounted measures for low-income households; others can expect payback in 3–5 years on typical installations.

EPC impact, and the rental deadline

Every upgrade that cuts gas use improves your Energy Performance Certificate rating. For homeowners planning to sell or let, the July price cap shows EPC C is becoming the de facto minimum: the government has proposed a 2030 deadline for rental properties, and lenders are increasingly offering green mortgages with lower rates for homes rated C or above. A heat pump alone can push a D-rated 1930s semi to a C; adding solar panels can take it to B. The cost of inaction includes higher bills and a harder-to-sell asset.

Households on standard variable tariffs will see the new cap apply from 1 July. Those who can switch to a fixed deal before the announcement should do so by mid-May. For everyone else: the cheapest kWh is the one you never use. Insulate now, heat pump later, and watch your bill, and your EPC, improve regardless of what happens in the Gulf.