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Britain faces years of soaring energy bills and billions in government support costs after Iranian strikes on the world’s largest gas facility sent UK prices rocketing and left ministers scrambling to protect households from the fallout.
Thursday’s assault on Ras Laffan tore through a facility that underpins a fifth of the world’s LNG supply and sprawls across an area three times the size of Paris. The chief executive of QatarEnergy delivered a sobering assessment of the damage, warning that getting the complex back to full capacity could take the best part of five years. Markets reacted immediately — UK gas prices spiked by more than a fifth and Brent crude surged eight per cent before retreating.
Energy market traders described the situation as “apocalypse now.”
Chief analyst at Montel Energy Analytics Tobias Federico said the strikes could trigger a “race for LNG between Asia and Europe in the coming months.”
“Europe is approaching the time of year where it seeks to refill gas storage ahead of the winter,” Federico said. “In parallel, it seems likely there will be further attacks in the Gulf region. It’s likely that wholesale gas prices could roughly double to 120 EUR/MWh or around 300 pence per therm (UK) over the next three months.”
Global shockwave
While Britain draws just two per cent of its gas directly from the Gulf, the destruction of Ras Laffan — combined with Iran’s ongoing blockade of the Strait of Hormuz — has sent shockwaves through global energy markets that will feed through to every household in the country, according to a report by the i-paper.
A chorus of condemnation followed from Western capitals. Starmer put his name to a joint communiqué alongside his French, German, Italian, Dutch and Japanese counterparts, presenting a united front against Tehran’s campaign.
“We condemn in the strongest terms recent attacks by Iran on unarmed commercial vessels in the Gulf, attacks on civilian infrastructure including oil and gas installations, and the de facto closure of the Strait of Hormuz by Iranian forces,” it said.
“We express our deep concern about the escalating conflict. We call on Iran to cease immediately its threats, laying of mines, drone and missile attacks, and other attempts to block the strait to commercial shipping, and to comply with UN Security Council resolution 2817.”
Bills protected — for now
For now, the price cap administered by Ofgem is holding the line — ministers have been at pains to point out that households are insulated from the immediate shock for the next quarter.
That protection has a fixed expiry date, however. The regulator is scheduled to revisit the cap in mid-May, and analysts are unanimous that the review will produce a substantial upward adjustment given what has happened in the Gulf.
For Reeves, the arithmetic of intervention has shifted dramatically. What began as a manageable support package is now shaping up to be a far more expensive commitment, and the Chancellor is said to be reassessing the scale of what will be needed.
Her instinct is to concentrate relief on those least able to cope rather than repeat the universal approach taken by Liz Truss after Russia invaded Ukraine — a decision that drained £40billion from the public finances over two years.
