# Winter energy price cap to rise 4%

By Susannah Streeter — 2026-08-26

Susannah Streeter, chief investment strategist at Wealth Club, says the increase shows how quickly the war in the Middle East has affected households.

She said: “Another winter of discontent could be looming for household finances, with energy bills set to rise again just as the colder months approach.

“Ofgem has increased the energy price cap by four per cent from October, adding around £60 a year to the typical household bill and taking the annualised cap from £1,663 to £1,723.

“The regulator says the increase reflects higher wholesale gas prices, with international gas markets remaining the dominant driver of the change.

“It’s another unwelcome step up for households, particularly after the sharp rise in the cap earlier this year. And while the government’s decision to remove VAT from domestic electricity bills from October is cushioning the blow, it only provides limited protection against higher wholesale costs.

“Ofgem estimates that without the VAT intervention, the increase would have been around £45 higher.

“The latest increase also shows how quickly geopolitical shocks can filter through into household finances. The Middle East conflict has pushed up international gas prices, while extreme heat across parts of Europe has also increased demand for electricity for cooling, adding to pressure on gas-fired power generation.

“Consumers have already had to get used to higher prices at the pumps and have been adjusting their spending accordingly.

“July retail sales volumes fell 0.5 per cent month-on-month, although sales remained relatively resilient overall and were still 1.6 per cent higher than a year earlier.

“With energy bills rising again in the autumn, the crucial run-up to Christmas, so important for retailers and hospitality businesses, looks set to become tougher, particularly if households continue to prioritise essentials over discretionary spending.

“That puts the government in an increasingly tricky position. It has already intervened by removing VAT from domestic electricity bills, but if international energy prices remain elevated, there is only so much that fiscal measures can do to shield households from global markets.

“There are, however, glimmers of better news in the energy markets this morning with Brent crude falling to $86 a barrel amid signs of encouraging diplomatic moves around the Strait of Hormuz.

“Iran and Oman are discussing a temporary maritime corridor and mine-clearance arrangements to help restore safer navigation through the strategically vital waterway.

“Trump hasn’t liked the US being left out of the discussions, with his irritation spilling over into threats against Oman, but this latest development hasn’t prompted any further sabre-rattling.

“Tighter US sanctions on Iran are aimed at pushing Iran into concessions, and that’s also been having a downward effect on crude prices.

“Meanwhile, CIA Director John Ratcliffe has travelled to Moscow for undisclosed meetings with Russian officials.

“The purpose of the trip has not been confirmed, so suggestions that it could be aimed at persuading Russia to distance itself from Iran or helping to advance a Ukraine settlement remain speculation.

“But any diplomatic progress on either front could potentially reduce geopolitical risk premiums embedded in energy prices.”

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