Will gas and electricity bills fall in 2026? Energy price forecast
Energy bills have dropped this month as Ofgem’s latest energy price cap kicks in, but the ongoing war in the Middle East means costs are likely to rise in the summer. How much could you pay?
Energy prices for millions of households in the UK fell on 1 April after the new price cap came into effect, but war in the Middle East could mean energy prices soar in the summer.
The current Ofgem energy price cap will be in effect between 1 April and 30 June, with most households in the country paying less for their energy than in the first quarter of the year.
The cut comes after the government announced it would scrap some green levies from household bills in the Autumn Budget, a move worth around £150 for households.
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Where are energy prices now?
Gas and electricity bills for millions of households fell by 7% on 1 April.
The new energy price cap has brought the annual average energy bill for a dual-fuel household paying for their energy by direct debit to £1,641.
The cap is a cap on unit prices, not your total bill, so your actual bill is determined by what you use.
The cut in energy bills is thanks to the government removing some levies for environmental schemes from household bills and instead funding through general taxation.
The government said the majority of households in the UK will benefit from this move, even those on fixed tariffs, tracker tariffs and time-of-use tariffs.
The savings will come despite an overall increase to the cost of servicing the UK’s energy infrastructure that was set to increase bills by around £57 per year had the government not stepped in.
But the US-Iran conflict means these savings could be short-lived.
Where will energy prices go from July onwards?
Ofgem, the energy regulator,will confirm the next price cap, covering the July to September period, by 27 May. It is widely expected to announce an increase in prices.
Cornwall Insight, an energy consultancy well-regarded for the accuracy of its price cap predictions, expects the July price cap to rise to £1,929 per year – an increase of 18%, or around £288. The prediction was made on 31 March and is reviewed regularly.
Before the Iran war began, Cornwall Insight expected the July price cap to be £1,645, broadly the same as in April.
The reason for the rise is that the global energy market has been thrown into turmoil following the joint US and Israeli strikes on Iran on 28 February, which led to increased hostilities in the Middle East, where a significant proportion of the world’s oil and gas comes from.
In particular, the conflict has led to Iran closing the Strait of Hormuz, a narrow naval passageway between the coasts of Iran and Oman through which around 20% of the world’s oil is transported.
The strait is also a major route for liquefied natural gas (LNG). The price of LNG, which makes up around 33% of the UK’s energy supply and is mainly imported, has also risen significantly.
Since the beginning of the conflict very few ships have managed to safely pass through the strait, pushing up global oil prices. The price of a barrel of Brent crude oil was around $70 before the conflict – it is now consistently above $100, and has even touched $115.
Increases to the cost of oil have major knock-on effects on the prices of many other commodities which are produced using oil.
For example, the price of a litre of petrol has increased by 30p since the conflict (42p for diesel), while the price of heating oil has more than doubled.
Ofgem calculates the price cap by observing the average wholesale price of energy over a three-month period.
We are now around halfway through the observation period for the July cap and, as this period has included spiking prices due to the war, we can expect the price cap to increase.
One minor victory for consumers is that Cornwall Insight’s latest prediction is £44 lower than the prediction it made on 19 March, which forecast the price cap to reach £1,973 per year. The prediction has been lowered as attacks on energy infrastructure in the region have relented slightly.
Craig Lowrey, principal consultant at Cornwall Insight, said: “Over a month into the Middle East conflict, energy markets are experiencing the kind of volatility not seen since 2022.
“With Ofgem’s price cap announcement just weeks away, infrastructure damage and continued disruption to marine traffic through the Strait of Hormuz are limiting the potential for any meaningful wholesale price fall.
“As a result, some of the increase is already effectively baked in. A rise in July is pretty much unavoidable, but how high prices go remains to be seen.”
Lowrey added that the timing of a rise in July is somewhat of a relief as the summer (July to September) price cap period is the one where energy demand is lowest.
However, he said: “If higher wholesale prices continue, it will be the effects on the October cap that have the most impact, and that is when the question of government support for households is likely to be revisited.”
Most forecasters agree that energy prices are set to rise in July and beyond.
Economists at the Bank of England (BoE) expect household energy prices to increase in the summer when the July price cap kicks in, helping push inflation to 3.5% in the third quarter of 2026.
The BoE used these forecasts to help inform its decision to hold interest rates at 3.75% at the most recent meeting of ratesetters at the Monetary Policy Committee.
EDF Energy expects the price cap will rise by £296 on 1 July, from £1,641 per year to £1,937, and says prices could rise again in October, to £2,047, and start 2027 at £2,057.
Meanwhile, economists at consultancy Oxford Economics expect the price cap to rise by 19% in July.
How to get help with paying your energy bills
If you’re struggling to afford your energy bills, your energy supplier may offer support with hardship grants. Octopus Energy has Octo Assist and British Gas has the British Gas Energy Trust.
You may be able to get a repayment holiday. This is where you ask your supplier to pause your repayments for a short amount of time to give you some breathing space.
Another option is to agree to an affordable payment plan. You will pay fixed amounts over a set period of time, which will cover what you owe plus an amount for your current use.
If you are on benefits, you might be able to repay your debt directly from your benefits through the Fuel Direct Scheme.
According to Citizens Advice, the Fuel Direct Scheme can be a good option if you can’t agree on a plan to pay back your debt, and it’s usually better than getting a prepayment meter.
As it becomes increasingly likely that the Iran war will raise energy prices, Chancellor Rachel Reeves has said she is looking into the possibility of providing government support in the Autumn.
This support would be specifically targeted “for those who need it most”, but said it was “too early” to give precise details in an interview with the BBC.
Additionally, some government schemes give some households money towards paying their energy bills.
The Warm Home Discount is offered to households in receipt of some means-tested benefits who use participating energy suppliers and provides £150 of credit that is automatically paid towards your energy bill. It is applied during the winter.
Meanwhile, pensioners with an income of £35,000 or less could be eligible for the Winter Fuel Payment, which is worth up to £300 each winter.
To help you keep energy bills low, we have gathered some top tips in our article looking at 14 ways to reduce your energy costs.
Where will heating oil prices go after recent eye-watering price hikes?
Some households in Britain are facing the prospect of an over 100% rise to the cost of heating their homes as the Iran war has led to a surge in the price of heating oil.
Disruptions to the supply of oil, which heating oil is derived from, have meant the price of the fuel increased from around 60p per litre on 28 February to more than £1.25 per litre on 31 March.
The government has announced an over £50 million targeted support package to help with the soaring cost of heating oil.
However, households reliant on heating oil are not protected by a regulator in the same way customers for gas and electricity are protected by the price cap, making them more sensitive to market forces.
For this reason it is especially difficult to predict where the price of heating oil will go in the future as no cap is agreed-upon in advance.
This being said, one way to get a rough idea of where the price of heating oil may go in the future is by looking at where the wider oil market will go.
