Energy Prices Could Rise Again as Strait of Hormuz Disruptions Continue

The Bank of England's boss, Andrew Bailey, has warned that energy prices in the UK could rise even higher due to disruptions in the Strait of Hormuz. The strait is a critical shipping corridor responsible for carrying 20% of global oil shipments and liquefied natural gas exports.

The closure of the Strait has already led to elevated energy costs hitting UK utility bills, petrol pumps, and food prices. To make matters worse, heatwaves across Europe have increased gas demand for power generation, further putting pressure on prices.

Bailey told MPs that some oil is getting through the Strait, but not in huge amounts. He acknowledged that emergency stock releases have helped to alleviate the situation, but these cannot continue indefinitely.

The energy price cap will rise by 4% from October 1 for a typical household in England, Scotland, and Wales, with bills increasing by £60 per year or £5 per month to an average of £1,723. This is the highest average bill since July 2023.