Global Conflict Driving Energy Prices: What It Means for UK Businesses

‍
‍

1. Conflict Origins: Operation "Epic Fury"
‍

The current crisis began on February 28, 2026, when the United States and Israel launched a coordinated large-scale military offensive against Iran.
‍

• Key Attacks: Initial waves targeted Iran’s nuclear enrichment facilities, air defence systems, and leadership hubs in Tehran. High-ranking officials, including the Supreme Leader and IRGC commanders, were reported killed in the opening 48 hours.
‍

On March 18th the major Iranian gas field of South Pars was hit by Israel-U.S. This sent energy prices soaring.
‍

On March 23rd, late Saturday night, President Trump announced that Iran had “48 hours” to open the Strait of Hormuz, or the U.S. would "obliterate" Iran's power plants. He postponed strikes on the power grid for a further five days, adding relief to the markets. The President once again postponed the proposed attacks, setting a 10 day deadline, for April 6th.
‍

• The Retaliation: Iran has responded with drones and ballistic missile strikes targeting U.S. bases in the region, as well as critical civilian infrastructure in the UAE and Saudi Arabia. Production at the massive Ras Laffan complex has been "halted" for safety and physical damage reasons. If the war ended today, a full return to pre-war export volumes could take months or even years to get back to full capacity.
‍
‍

2. The Strait of Hormuz: A Global Standstill
‍

On March 2, 2026, Iran’s Revolutionary Guard declared the Strait of Hormuz "closed" to any vessel supporting the coalition, where it remains a “no-go zone.”
‍

• The Strategic Chokepoint: This is the world’s most important energy artery. Approximately 20% of global oil & LNG passes through this narrow passage.
‍

• Shipping & Insurance: Major shipping lines have suspended transits, and war-risk insurance premiums have rocketed, making it financially impossible for most tankers to enter the Gulf.
‍

• The "Invisible" Minefield: Beyond physical blocks, the threat of Iranian sea mines has brought tanker traffic to a near standstill. Roughly 20 million barrels of oil per day and 20% of the world’s LNG are currently "trapped" within the Gulf.
‍

• Global Impact: While the UK's physical dependency on the Strait is relatively low (~1% of gas), the global market is a connected pool. This has choked off the primary export route for Qatar, Kuwait, Iraq, and the UAE.
‍

How this Impacts UK business energy procurement
‍

The Asia-Europe "LNG Tug-of-War"  Gas Supply Concern
‍

The most direct threat to UK gas prices is the diversion of LNG to Asian markets (Japan, South Korea, China, and India).
‍

• The Asian Vulnerability: Asian economies are almost entirely dependent on Gulf LNG via the Strait. With that route cut, they are now forced to bid aggressively for "flexible" cargoes from the US and West Africa.
‍

• The Impact on Europe: Europe (and the UK) must now compete with Asia for these same Atlantic cargoes. To "win" a tanker, UK wholesale prices must rise high enough to outbid Asian buyers. This has essentially turned a regional Middle East war into a global price war for the remaining available molecules of gas.

‍

‍

‍

Impact on the Forward Curve & Summer-26 Positions

‍
Customers looking to "close out" or fix their (Sum-26) positions are facing a brutal reality.
‍

• Wholesale Rocketing: UK NBP gas prices surged over 90% in the first week of March, peaking near 151p/therm.
‍

• Extreme Backwardation: The curve is heavily "front-loaded." Sum-26 is carrying a massive "War Premium" (136p–169p) because the risk is immediate. Further out (2028/29), prices remain lower (60p–70p), reflecting a belief that supply will eventually normalize.
‍

• The Procurement Trap: By fixing now, customers are locking in the "Peak of Fear." However, failing to fix leaves them exposed to even higher spikes if the conflict expands to include strikes on Saudi or Qatari gas fields themselves.

Recovery: If the War Ends, How Fast do Prices Drop?
‍

Should a ceasefire or de-escalation occur (e.g., within the 4-5 week window initially suggested by some U.S. officials), the market reaction will be split:
‍

• The "Sentiment Drop": A significant portion of the price (the speculative "risk premium") would likely drop within 48–72 hours of a confirmed de-escalation. We could see prices fall from 140p back toward 100p almost instantly.
‍

• The Physical Backlog - “The Cul-de-Sac Effect”: The backlog following a reopening of the Strait of Hormuz will be one of the most complex logistical puzzles in modern maritime history. Thousands of stranded vessels are currently “locked” inside the Gulf, whilst others are waiting to enter. Upon re-opening, it could take 2-4 weeks to clear the immediate queue of ships.

Add to this the security issue (minesweeping) which could take 7-10 days of clearing operations. All with the proviso that should a deal or peace be achieved no more attacks by Iran or its proxies would be made.

While ships can start moving quickly, the oil and LNG will take far longer to stabilise. Oil could take between 30-90 days to reach pre-war flow rates, whilst LNG will remain short by 12.8 million tonnes per year, for the next 3-5 years due to the physical damage at Ras Laffan.

The "Structural Lag": A full return to "Pre-War" levels (70p–80p) will be much slower.
‍

• Insurance & Logistics: It takes weeks for tankers to re-route and for insurance companies to lower premiums.
  ‍

• Storage Refills: Because UK storage is currently low (~30%), the massive "injection demand" to refill tanks for next winter will keep prices from crashing back to "cheap" levels throughout Q2-26.
  ‍

• Report Conclusion: "We anticipate that while a diplomatic resolution could shave 30-40p off the therm within days, the structural damage to global supply chains and the urgent need to refill European storage means a return to 'sub-80p' gas is unlikely before late Q3-2026."

‍