UK Gas Prices: What the Iran Conflict Means for Your Brewery Energy Bills
- Chris Lewington
- Apr 7
- 4 min read
The conflict in Iran is creating new headaches for brewery operators across the UK. Gas prices have risen sharply, electricity costs are following, and the picture for the coming year is more complicated than the headlines suggest. Here is a clear breakdown of where prices are now, why they have moved, what the medium and long-term outlook looks like, and what breweries can do about it.
Short-term impact: the Strait of Hormuz and UK supply
The most significant immediate consequence of the conflict has been the closure of the Strait of Hormuz. Roughly one fifth of the world's liquefied natural gas passes through this route, and its closure has tightened supply at the same time as oil price rises have fed through into gas markets. The two commodities carry varying index linkages in wholesale trading, so the oil rise moves gas even though oil is not used to produce natural gas.
The result has been a meaningful price spike over a short period. Here is where the UK natural gas price stands over the past twelve months:
Zooming out to a ten-year view puts this in context:
The current spike is significant, but it is materially different from the Ukraine war shock of 2022. That crisis saw Russia remove over 40% of the EU's natural gas supply overnight. The Strait of Hormuz carries around 8% of EU gas imports by comparison. The scale of disruption is different, even if the direction of price movement is the same. The ten-year chart is a useful reminder of what genuine supply removal looks like.
Medium-term outlook: why prices are locked in for at least a year
The UK government's response has effectively been to draw down gas storage reserves on the assumption that the Strait will reopen and the shock is temporary. That strategy held while reserves were high following a mild winter. The problem is that reserves are now at their lowest level in eight years.
Replenishing those reserves means purchasing gas at current elevated market prices, which locks in a wholesale cost increase for at least twelve months regardless of how quickly the conflict resolves. Electricity prices compound this further. In the UK, the cost of electricity is always set by the most expensive form of generation at the margin, which is almost always gas-fired power. A sustained gas price increase feeds directly and immediately into electricity bills.
Long-term factors
The longer the Strait remains closed, the more near-term prices rise and the longer those elevated prices stay locked into forward contracts and storage replenishment. But the Strait is one variable in a complex market. Each of the following will push the price in one direction or the other over the coming year:
A cold extended winter or late spring lifting heating demand
A cloudy or low-wind summer reducing renewable output and increasing reliance on gas generation
Further geopolitical developments in any major supply region
Any change in UK or EU energy policy on storage obligations
Predicting how these interact is not possible with any reliability. What is clear is that prices are elevated now and are unlikely to return to the levels available just two months ago for at least twelve months, all other factors being equal.
How much have prices risen?
Every brewery's situation depends on contract structure and timing. As a general indication: electricity available at around 19p/kWh in January is now closer to 22p/kWh. Gas has moved from approximately 6p/kWh to around 9p/kWh. Even if the conflict ended tomorrow, it would take roughly twelve months for prices to return to where they were before it started.
What your brewery can do now
On contracts, I cannot give generic advice because the right decision depends entirely on your current terms, expiry date and risk tolerance. What I can say is that last year was a good time to renew, this year is expensive by recent comparison, and whether next year is better or worse depends on factors no one can predict with confidence.
What you can control is how much energy you use. Reductions have always been, and will always be, the most reliable way to reduce your utility costs regardless of where the wholesale market goes. I have written free guides covering both electricity and gas reduction in breweries, and given talks across the UK and EU on the subject, including a recorded session available on YouTube. For SIBA members, I also wrote a guide on the ten best ways to increase brewery profitability, the majority of which are energy-based. That is available through the SIBA Toolbox.
I am currently working with Left Handed Giant, Northern Monk, Siren and Vault City on structured reduction programmes. All of those engagements operate on a no-savings, no-fee basis, with my fee based entirely on the percentage of reductions achieved.
If you are working through your options or approaching a contract renewal and want to talk it through, get in touch. There is no charge for that conversation.
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