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The economic impacts of the Iran war are already being felt in global markets, and could raise energy prices and wider consumer bills in the UK before long.
The immediate impact of American and Israeli attacks on Iran, and Tehran’s retaliatory strikes on numerous neighbours in the Middle East, has been to push up oil and gas prices.
The Persian Gulf that separates Iran in the north from Saudi Arabia, Qatar and the UAE in the south, is the most important fossil fuel artery in the world, and for now it is effectively closed.
Iranian military threats against ships transiting the Strait of Hormuz have rendered vessels uninsurable, and on either side of the narrow passage north of Ras-al-Khaimah, scores of vessels are at anchor awaiting instruction.
Markets latest: Natural gas costs up 93% since Iran war began
Direct Iranian attacks on major oil and gas terminals in Saudi Arabia and Qatar, a crucial producer of liquid natural gas (LNG), make it clear that Iran considers energy infrastructure a legitimate target as it tries to make the conflict as painful as possible for Washington’s allies.
Oil prices have risen around 18% since the conflict began, pushing Brent crude close to $83 a barrel, and bringing an abrupt end to a period of relative price stability brought about by relative oversupply.
The increase will inevitably be felt at petrol pumps in due course, with wholesale petrol prices already up 2.3% and diesel prices 7%.
The more dramatic impact could be on energy prices, courtesy of the UK’s exposure to wholesale gas prices.
Gas is central to the UK economy because of its central role in the electricity system. It’s not just a source of heat and power, providing crucial flexible capacity, but it also sets the price for all sources of electricity in the market.
So when gas prices increase, as they have done in the last four days, we feel it acutely. UK wholesale gas prices have more than doubled since the weekend, pushing the…
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