British energy price cap tipped to rise by £332 per year in July due to oil and gas shock – business live

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Energy price shock could add £1,500 per year to mortgage costs

UK mortgage rates have risen again today, even though the Bank of England left base rate on hold yesterday, at 3.75%.

Data provider MoneyFacts reports that the average two-year fix residential mortgage rate has risen from 4.83% at the start of March to 5.35% today. That shift will have added around an extra £900 per year to the cost of borrowing £250,000 over 25 years.

It’s already the highest two-year fixed mortgage rate since March 2025 (up from 5.32% on Thursday).

Five-year fixed mortgage rates are pricier too – with the average rate up from 4.95% at the start of March to 5.39% today. That’s the highest since July 2024, adding around an extra £775 per year to the cost of borrowing £250,000 over 25 years.

Moneyfacts has calculated that if Bank rate rises to 4% or 4.25%, as market pricing predicts, average rates on new mortgages could stabilise at around 5.50% to 5.75%.

That could add an extra £1,000 - £1,500 per year to the cost of borrowing £250,000 over 25 years compared to rates at the beginning of March.

Adam French, head of consumer finance at Moneyfacts, explains:

“Swap rates, which underpin mortgage pricing, have risen sharply following the decision to hold the base rate at 3.75%, with markets interpreting commentary from the Bank of England as leaving the door open to rate rises amid ‘Trumpflation’ fears. With two- and five-year swaps now sitting at their highest level in more than a year, lenders are once again facing higher funding costs, and this will feed through into mortgage pricing.

“Moneyfacts analysis of more than 30 years of historic rates data shows mortgage rates have historically averaged around 1.5 percentage points above Base Rate. If markets continue to price in one or two rate rises, this could see average new mortgage rates stabilise at around 5.50% to 5.75%. That would leave borrowers paying £1,000 to £1,500 more per year on a typical £250,000 mortgage compared to just a few weeks ago.

“While a quicker resolution to the conflict in the Middle East could ease pressure on rates, the reality is that a more volatile world is a more expensive world. Even though the most competitive deals will remain below average, anyone looking to buy or remortgage this year needs to prepare for higher costs than previously expected.”

British energy price cap tipped to rise by £332 per year in July due to oil and gas shock

British energy bills are on track to jump by several hundred pounds per year once the official price cap is adjusted this summer.

Consultancy Cornwall Insight has predicted that the bill for a typical dual fuel consumer will rise to £1,973 per year in July, when the next quarterly review of the cap comes in.

That would be a £332 rise from April’s cap, of £1641 a year for an average bill-payer, and hurt strugging families [there’s no cap on the maximum bill, just the maximum charge for each unit of energy].

This prediction may harden calls for the government to launch a “social tariff” providing cheaper energy for poor households amid growing concerns over the Iran conflict.

The quarterly price cap is set based on the average energy prices in the three-month period before it is set (mid-Februry to mid-May), so the jump in oil and gas prices in recent weeks will have an upward effect on the cap.

Despite the dip in energy prices this morning, UK inflation is still expected to jump this summer.

Sanjay Raja, chief UK economist at Deutsche Bank, expects inflation to rise over 3% this year, rather than drop towards the official 2% target.

He writes:

Where to next? In our view, the inflation outlook has rarely been more uncertain than it is now. The Iran conflict has resulted in a surge in energy prices. Oil prices are tracking nearly 50% higher than pre-conflict levels. Gas futures are trading nearly 90% higher. The impact on the inflation outlook we expect will be meaningful.

While we do not account for fiscal support in our updated projections, we think there is a high likelihood that government support can help curb energy inflation. For now, we condition our projections on market expectations as of 18 March. This has pushed our 2026 CPI projections up from 2.4% (in our last update) to 3%, with a peak CPI of nearly 3.2% y-o-y expected later this year.

The London stock market is rallying this morning, led by travel and hospitality firms.

The FTSE 100 index has gained 50 points, or 0.5%, to 10,113, having yesterday tumbled by 2.35%.

Intercontinental Hotels (+3.3%), easyJet (+2.9%) and British Airways parent company IAG (+2.7%) are the top risers.

Stocks are rising as energy prices ease back, following efforts by the US and Israel to reassure investors unsettled by the latest escalation in the Middle East.

Jim Reid, market strategist at Deutsche Bank, takes a historic view:

Today will be the 15th trading day of the conflict so far…that is on average when we bottom out in US equities after a geopolitical shock.

However it would be hard to trade on the back of averages at the moment with so much uncertainty so headlines will be more important than history here but if you’re looking for optimism the normal geopolitical playbook would at least give you hope.

Oil and gas prices dip after Netanyahu agrees to 'hold off' attacks on Iranian gas fields

Oil and gas prices are dropping today, after Israeli prime minister Benjamin Netanyahu indicated he would hpld off on further attacks on Iran’s gas field at the request of US President Donald Trump.

The Brent crude oil price has dipped by 1.7% to $106.75 a barrel this morning. That’s rather lower than yesterday’s high of $119, but still nearly 50% higher than before the conflict began.

Gas prices are dipping too. The month-ahead UK gas price is down 2% at 153p per therm. That’s down from a high of 180p yesterday, but still almost double levels before the Iran war began.

Continental European gas prices are down 1.9%.

This comes after Netanyahu told reporters at a press conference that Israel “acted alone” in striking Iran’s South Pars gasfield this week.

He added:

“President Trump asked us to hold off on future attacks, and we’re holding out.”

Israel has, though, been pounding Tehran with airstrikes today.

Our Middle East Crisis Live blog has all the details:

‘Demand destruction has begun’

JP Morgan have published a very interesting note on the demand destruction theme, which FT Alphaville have covered here.

They’ve examined the economic damage that the oil market crisis is beginning to cause in Asia, and report:

Diesel has emerged as the region’s immediate choke point, with surging prices slowing both travel and freight. Governments are responding with a mix of demand management and emergency measures. Bangladesh brought forward the Eid-al-Fitr holiday and allowed universities to close early to save fuel. The Philippines and Sri Lanka instituted four‑day workweeks to curb diesel use and stretch dwindling stocks. Pakistan closed schools and shifted universities online. Officials in Thailand and Vietnam have been urged to use stairs, work from home, and limit travel, while Myanmar introduced alternating driving days to reduce road fuel demand. In parallel, authorities are intervening directly into fuel markets to stabilize fuel prices.

Other key points include:

• As jet fuel approaches $200/bbl, carriers are shifting from cost management to outright service withdrawal, with many routes rendered uneconomic

• In many regions, demand isn’t being reduced by choice but by the physical absence of input

• Oil demand is, on average, highly inelastic in the short run because most end uses have few immediate substitutes — factory boilers rely on fuel oil, aircraft require jet fuel, and most cars still run on gasoline.

More here.

World’s energy watchdog advises emergency measures as oil prices rise

The world’s energy watchdog has advised governments to reduce highway speeds and encouraged workers to carpool or, ideally, work from home to combat soaring oil prices and impending fuel shortages caused by the Middle East conflict.

It has also recommended countries consider limiting car access to designated zones in large cities, by giving vehicles with odd-numbered plates access on different weekdays to those with even-numbered plates.

The International Energy Agency (IEA) has advised member countries, including Australia, the UK and the US, to take the emergency measures to curb oil demand, following the military strikes on Iran that have triggered the most significant supply disruptions in the history of the global oil market.

UK borrowing jumps to over £14bn in February

Britain’s government borrowed more than expected last month, new data shows.

The difference between total public sector spending and income widened by £2.2bn year-on-year in February, to £14.3bn.

That’s more than expected – the City had expected a £8.5bn deficit for the month.

It’s also the second highest February borrowing since monthly records began in 1993, behind that of 2021 during the Covid-19 pandemic.

It follows a record surplus in January, though, when a surge in tax payments boosted the government’s receipts.

So, after 11 months of the financial year, borrowing is 8.7% less than in the same 11-month period a year ago.

Today, ONS senior statistician Tom Davies says:

“Borrowing was higher than the same month last year and was the second-highest February figure on record. While receipts were up on last year, that was outweighed by a rise in spending, including the later timing of some debt interest payments.

“However, across the first eleven months of this financial year as a whole, borrowing was down, as receipts increased by more than spending.”

Introduction: Demand destruction fears rise after Iran war drove up oil and gas prices

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Three weeks into the Iran war, investors and analysts are increasingly worried that the world economy faces ‘demand destruction’.

The jump in oil and gas price this month, as supply from the Middle East has fallen and production facilities have been attacked, leads to a remorseless logic: if supply is short, prices have to rise until demand falls.

You can’t, after all, print more molecules, a truth that has been brought home by the attacks on Iran’s massive South Pars gasfield, and QatarEnergy’s huge LNG production site.

And there are signs that demand destruction is underway, especially among energy importers.

Egypt, for example, is beginning curbing some electricity use, including by ordering shops and cafes to close earlier.

India, which has also suffered a drop in fuel imports this month, is also taking action. Refineries have been directed to maximise LPG production for household use and supplies have been prioritised for hospitals and educational institutions, leaving businesses scrambling.

Oil and gas prices are dipping this morning, but Brent crude is still trading at over $100 a barrel.

Jet fuel prices have been rising sharply this month too, leading to predictions that airlines will hike prices, subduing demand, or even cut routes.

These changes mean that oil is “dictating the tempo of global activity”, says Stephen Innes, managing partner at SPI Asset Management.

He explains:

Asia is the first to blink, as it always is when the energy complex starts to bite. Japan’s petrochemical sector is already throttling back, not as a strategic choice but as a forced response to feedstock scarcity and elevated costs. Ethylene runs are being cut, restarts delayed, and the entire chain is starting to behave like a machine that no longer trusts its fuel supply. South Korea is moving down the same path, with major producers stepping back from full capacity and even invoking force majeure, which in market language is less a legal term and more a flare shot into the sky signaling that the system is under stress. When governments begin labeling inputs like naphtha as economic security items, you know the conversation has shifted from price discovery to resource preservation.

China, which typically absorbs shocks with scale and policy cushioning, is not immune either. Refinery runs are being dialed down to conserve crude, not because demand is booming but because supply certainty has evaporated. Downstream, petrochemical operations are shutting units and suspending deliveries, effectively pulling liquidity out of the physical market. This is how demand destruction actually looks in real time.

The agenda

• 7am GMT: UK public sector finances for February

• 9:45am GMT: Speech by FCA CEO Nikhil Rathi at JP Morgan Pensions and Savings Symposium.

• 10.30am GMT: Bank of Russia interest rate decision

• 11am GMT: CBI Industrial Trends report