UK energy price cap to rise 4% as US-Israel war on Iran drives wholesale gas costs

Ofgem, the UK energy regulator, announced a 4% increase in the energy price cap effective October 1, 2026, driven by a sharp rise in wholesale gas prices resulting from the US-Israel war on Iran. A typical household will pay about £60 ($80) more per year. The UK government also announced a tax cut on electricity bills to mitigate impacts, lasting until the end of the 2027 financial year. However, experts warn that volatility may persist due to geopolitical tensions, particularly around the Strait of Hormuz, which Iran has shut. The price cap affects gas and electricity, while the tax cut applies only to electricity. Many households on fixed-rate plans will not be immediately affected, but most will face higher bills in winter. The war has triggered a global energy crisis, with wholesale prices rising 11% over the past three months. Analysts predict continued price increases and reduced household spending power.