The boss of the Bank of England has warned energy prices could rise even higher as Britain continues to feel the impact of Donald Trump’s war on Iran and the closure of the Strait of Hormuz.
Andrew Bailey told MPs on Tuesday that energy prices “could be higher still” as the key oil route remains largely closed.
It comes as millions of British households face a hike in their energy bills from October, after regulator Ofgem raised the price cap to a three-year high.
Speaking to the Treasury Committee on Tuesday, Mr Bailey said: “I think it’s fair to say that we’ve got higher energy prices. They could be higher still, I think I would say.
“The strait obviously remains largely closed. We think some [oil] is getting through, but not huge amounts.”
The crisis in the Strait of Hormuz erupted on 28 February after joint US-Israeli strikes on Iran led to an on-and-off blockade of the critical shipping corridor.
The closure impacted 20 per cent of global oil shipments and liquefied natural gas (LNG) exports, prompting the largest shock to global energy supplies in modern history.
Mr Bailey went on to say though more use is being made of pipelines in the area to ship oil, Houthi attacks in the Red Sea area continue to disrupt shipment.
“ There have been emergency stock releases, quite big emergency stock releases, and they’ve obviously helped. Obviously, they can’t go on…I think the current ones run till about November.”
The closure of the Strait has seen elevated energy costs hit UK utility bills, petrol pumps, and food prices, while heatwaves across Europe have added further pressure by increasing gas demand for power generation to meet air conditioning and cooling demands.
Andy Burnham has vowed to continue to look for ways to get prices down in the long term, but faces criticism from political opponents and calls to do more to help households.
The energy price cap will rise by 4 per cent from October 1 for a typical household in England, Scotland and Wales.
The regulator said bills will rise by £60 per year – or £5 per month – to £1,723 for the average household using both electricity and gas – the highest average bill since July 2023.
The energy price cap was introduced by the government in January 2019 and sets a maximum price that energy suppliers can charge consumers in England, Scotland and Wales for each kilowatt hour (kWh) of energy they use.
It aims to ensure that prices for customers on default energy tariffs are a fair reflection of the cost paid by suppliers for wholesale energy, and that the profit firms make is capped.
Ofgem sets its cap every three months as the average amount paid by the typical household.