Households across the UK are being warned to brace for higher energy bills this winter as European countries scramble to replenish their natural gas stores before the weather dips.
Wholesale natural gas prices are already at three-year highs, which could lead to increased energy bills for businesses and consumers.
Europe, which delayed its summer stockpiling due to high wholesale costs sparked by the Iran war, had been gambling the conflict would end before winter and prices would in turn fall.
Storage levels are significantly lower than usual for this time of year, with countries facing the prospect of rushing to buy gas now or paying potentially higher prices when the winter comes.
The European benchmark natural gas price topped €75/MWh on Wednesday, its highest level since late 2022, the tail end of a spike caused by Russia's invasion of Ukraine. Natural gas prices in the UK this week topped 185p per therm, also the highest since late 2022.
The price has jumped in the past week amid a return to hostilities between the US and Iran, with analysts fearing the renewed fighting will keep the key Strait of Hormuz closed even longer. Typically, around a fifth of the world's oil and liquefied natural gas (LNG) is transported through the waterway.
Hamad Hussain, senior climate and commodities economist at Capital Economics, said he did not expect the waterway to begin reopening until early 2027.
Even then, there will be a lag before energy is flowing freely through the strait and pressure on energy prices are eased.
"The risks to gas prices are definitely tilted towards the upside," Hussain told the BBC, warning that the gas price would top €80 by the end of this year.
Hussain recalled interviews with gas storage operators at the outbreak of the US-Israeli war in Iran saying they would wait three to four months for the crisis to ease before stocking up.
"We are about six months into the strait being effectively closed and that obviously has not happened," he added.
Higher wholesale gas prices feed through to household energy bills by helping determine regulator Ofgem's price cap.
The energy price cap rose in July, and will increase by 4% in October, leaving a typical household paying £1,723. But analysts at the energy consultancy Cornwall Insight have forecast domestic energy prices could rise a further 9% in the new year, bringing renewed concern to households during the coldest months.
Dr Craig Lowrey, principal consultant at Cornwall Insight, told the BBC on Thursday a fresh increase in wholesale prices would "increase pressure on our January price cap forecast".
However, he cautioned that there was "plenty of time to go" and a fall in wholesale prices could ease the pressure.
