Households across the UK are bracing for elevated energy bills this winter as European nations race to fill natural gas reserves before cold weather arrives. Wholesale natural gas prices have climbed to their highest levels in three years, threatening to push consumer energy costs even higher during the most expensive months of the year.
The underlying cause stems from geopolitical tensions in the Middle East. Renewed hostilities between the US and Iran have disrupted shipping through the Strait of Hormuz, a critical chokepoint through which roughly one-fifth of the world's oil and liquefied natural gas (LNG) passes annually. This disruption has prevented Europe from restocking gas supplies at reasonable prices during the summer months, leaving storage levels significantly below historical norms as winter approaches.
The European benchmark natural gas price reached €75 per megawatt-hour on Wednesday, marking its highest point since late 2022 when Russia's invasion of Ukraine triggered an energy crisis. In the UK, natural gas prices this week climbed to 185 pence per therm, also the highest since late 2022. According to market data, UK prices were trading at 181.03 GBp/thm on 2 September 2026, reflecting the sustained pressure on energy costs.
European underground gas storage stood at just 65.4% capacity on 1 September, more than 16 percentage points below the five-year average and the lowest level for that date since records began in 2011, according to energy market analysis. The European Union has a regulatory target requiring gas stores to reach 90% capacity by 1 November each year, creating urgent pressure on buyers to purchase supplies now rather than risk even higher prices later.
When will the Strait of Hormuz reopen?
Hamad Hussain, senior climate and commodities economist at Capital Economics, does not expect the waterway to begin reopening until early 2027, with a further lag before energy flows freely and price pressures ease.
The risks to gas prices are definitely tilted towards the upside,Hussain warned, predicting that wholesale gas prices could exceed €80 per megawatt-hour by the end of this year.
Hussain recalled conversations with gas storage operators at the outbreak of the US-Israeli conflict in Iran, when they indicated they would wait three to four months for the crisis to resolve before resuming stockpiling.
We are about six months into the strait being effectively closed and that obviously has not happened,he noted, highlighting how the prolonged disruption has forced difficult choices on energy buyers across Europe.
Analysts cited in recent market coverage suggested that European storage may reach only 70% to 75% of capacity by the start of the heating season if current injection rates persist, leaving the continent vulnerable to supply shocks during winter.
How will this affect UK household bills?
Higher wholesale gas prices directly influence household energy bills through Ofgem's price cap mechanism, which reflects movements in wholesale markets. According to Ofgem's announcement, the energy price cap will increase by 4% from 1 October 2026, taking a typical household's annual bill to £1,723. The new tariff includes a gas unit rate of 7.97 pence per kilowatt-hour and a standing charge of 29.68 pence per day for standard variable customers.
This October increase follows a rise in July. However, energy consultants at Cornwall Insight have forecast that domestic energy prices could climb a further 9% in January 2027, bringing renewed financial strain to households during the coldest months when heating demand peaks. Dr Craig Lowrey, principal consultant at Cornwall Insight, told the BBC on Thursday that a fresh increase in wholesale prices would
increase pressure on our January price cap forecast, though he cautioned that
there was plenty of time to goand a fall in wholesale prices could ease the pressure.
The government has taken some steps to cushion the impact. According to Ofgem's latest guidance, the government has removed VAT from electricity bills from 1 October 2026 to 31 March 2027, though gas still carries 5% VAT. The Department for Energy Security and Net Zero also pointed to broader efforts to reduce Britain's reliance on natural gas through renewable energy expansion.
Why is UK gas storage so low?
The UK holds almost no natural gas in storage for the coming winter, a situation that has prompted warnings from energy industry leaders. Chris O'Shea, chief executive of Centrica, which owns British Gas, has repeatedly called on the government to support expansion of the Rough storage facility in the North Sea.
We have almost no gas in storage in the UK for the coming winter and this is a huge concern as energy security is national security,he stated on LinkedIn last week.
O'Shea has warned that the Rough facility will close next year without a government deal, as it has become unviable to fill under current market conditions. The Department for Energy Security and Net Zero responded by saying it remains open to discussing proposals on gas storage sites, provided they offer value for money to taxpayers. The department also noted that gas prices are determined on international markets, dismissing criticism of the UK's own low storage levels as a policy failure.
Could winter weather change the outlook?
Ángel Talavera, chief European economist at Oxford Economics, characterised the situation as presenting both risks and reasons for restraint. On one hand, wholesale gas prices remain significantly lower than during the crisis that followed Russia's full-scale invasion of Ukraine in 2022. On the other, households and businesses will still face substantially higher energy bills than normal over the coming months.
It's serious, but not catastrophic,Talavera told the BBC, adding that
something would have to dramatically change to lower prices.
The overall picture depends heavily on winter weather patterns. A reduction in demand for natural gas driven by the shift towards renewable energy sources could help moderate prices, but a colder-than-average winter would have the opposite effect, driving up heating demand and pushing prices higher. Talavera pointed to the unpredictability of El Niño conditions developing over the Pacific Ocean, which could influence Britain's winter climate. The Big Freeze of winter 2009-10, the coldest in three decades at that time, coincided with an El Niño, yet the 2006-07 El Niño winter proved unseasonably warm.
The weather machine remains our main hope,Talavera said, suggesting that warmer-than-average temperatures could ease demand pressures.
Gas prices could decline if weather reduces demand and the Strait of Hormuz reopens sooner than currently expected, but both outcomes remain uncertain. The timing of any reopening and the pace of energy flow restoration through the waterway will be critical factors in determining whether wholesale prices begin to fall before the peak winter heating season.
What happens next?
The new Ofgem price cap period takes effect on 1 October 2026, replacing the current rates that remain in force until 30 September. The EU gas storage deadline of 1 November 2026 will mark a critical checkpoint, when storage levels are expected to be assessed against the regulatory 90% target. Between now and then, European buyers will continue competing for available supplies, potentially keeping wholesale prices elevated. The January 2027 price cap review by Ofgem will determine whether the predicted 9% increase materialises, with that decision likely to depend on wholesale price movements over the autumn months.
