How the Middle East Conflict is Driving UK Energy Prices - And What it Means for Businesses

With global energy markets being shaken again, UK businesses are heading into another energy price shock.

The UK may not rely heavily on Middle Eastern oil or gas, but our energy prices are tied to global markets. As we’re seeing, when tensions rise in key regions, prices here move fast.

In this blog, we explore how global conflict drives UK energy prices, revisit the lessons from the 2022 energy crisis, and assess what this means for businesses today. We also highlight the practical steps companies can take to reduce exposure and build long-term cost certainty.

At first glance, conflict in the Middle East can feel far removed from UK businesses. But energy markets don’t work on geography, they run on global pricing, supply expectations and risk. 

The Middle East plays a critical role in global energy supply, with a significant share of the world’s oil and liquefied natural gas (LNG) passing through the region. When conflict disrupts key shipping routes like the Strait of Hormuz, where around 20% of global supply flows, markets react immediately. Increased risk, higher insurance costs and rerouted shipments tighten supply, pushing global oil and gas prices higher within days.

Because UK energy prices are tied to these international benchmarks, when global prices rise, UK gas and electricity costs rise with them. In Britain, gas-fired power stations often set the wholesale price of electricity, creating a system where even companies with limited direct gas usage are exposed to global volatility. 

Why UK businesses need to pay attention
Many UK businesses may feel protected from short-term price spikes if they are on fixed energy contracts. But that protection is temporary. When contracts come up for renewal, prices are reset based on current market conditions - and if global energy prices remain high, businesses will feel the full impact.

This matters even more because energy costs are already significantly higher than just a few years ago. According to ONS, electricity prices remain around 75% higher than in 2021, prior to the Ukraine/Russian conflict, while gas prices are still more than double pre-crisis levels. 

That sustained increase is already affecting performance. Energy-intensive industries have seen output fall by over 30% between Q1 2021 and Q4 2024. This shows that energy volatility isn’t just an overhead, it directly impacts margins, competitiveness and growth.1

What the 2022 energy crisis taught us
The Ukraine crisis exposed just how vulnerable the UK is to gas market shocks. In 2022, wholesale gas prices surged to record levels, forcing the government to step in with the Energy Price Guarantee to protect households and businesses from unmanageable costs. Energy bills soared, suppliers collapsed and many businesses faced significant pressure on margins and cash flow.

For organisations with solar already in place, the impact was very different. Generating energy on-site helped reduce exposure to rising grid prices, softening the financial hit. Those with battery storage had even greater control - able to store energy and use it when prices peaked, unlocking additional savings through time-of-use tariffs.

The crisis also exposed challenges within the solar market. A surge in demand brought an influx of new entrants, often with varying levels of experience, impacting quality in some cases. At the same time, DNO backlogs caused grid connection delays, we experienced equipment shortages and rising component costs which created bottlenecks across the industry.

The lesson is clear. Energy shocks don’t just increase costs - they expose weaknesses. And businesses without a strategy to manage energy risk remain the most vulnerable. Recent events in the Middle East show these weaknesses haven’t gone away - and businesses remain exposed. Limited domestic supply, reliance on imports and lower storage capacity than Europe, mean global disruptions are hitting harder and faster. 

Why solar is the smart solution
The reality is, price volatility isn’t going away. The businesses that acted after the last energy crises are already reaping the rewards and will soon be realising their return on investment – which averages at about five years for commercial installs.  

Solar gives businesses control over one of their biggest costs. By generating electricity on-site, you reduce reliance on the grid and protect your business from global price shocks. Add battery storage, and that control increases. You can store energy and use it when prices spike - cutting peak costs, improving ROI and giving your business greater protection against market volatility.

These days renewables should not be viewed solely as an environmental initiative, but as part of a broader risk business strategy. Energy management can be a fundamental framework for cost saving. 

The process starts with understanding your energy use, assessing your site and identifying what works for your business, including funding options. Battery storage and demand response solutions may further enhance flexibility, enabling your businesses to shift usage away from peak pricing periods.

In a world where energy risk is rising, generating your own power is the smarter choice.

If you want to reduce costs, improve resilience and take control of your energy, start with a free feasibility study today. Get in touch.

Source ref
1https://www.ons.gov.uk/economy/economicoutputandproductivity/output/articles/theimpactofhigherenergycostsonukbusinesses/2021to2024