Middle East Tensions Hit Energy Markets
The Israel-Iran Conflict has flared in recent months, shaking global energy markets and driving energy prices higher. In mid-June, amid the Israel–Iran Conflict, Brent crude briefly climbed above £74 a barrel following airstrikes and retaliatory missile exchanges.
While prices have since eased, the conflict has revived fears of wider instability and potential supply disruptions. For businesses, this raises real concerns about rising costs—not just in fuel and transport, but across energy-intensive operations.
Supply Risks and Shipping Chokepoints
Disruptions in the Middle East can send oil markets swinging. Recent events have almost halted Iranian exports and spotlighted the Strait of Hormuz.
-
Iran’s Oil Exports Collapse: Satellite tracking shows Iran sent virtually no oil from Kharg Island in the past few days. Weekly exports are estimated around 100,000 barrels/day, versus ~1.7 million bpd earlier this year.
-
Strait of Hormuz is Under Threat: This narrow 21-mile channel carries roughly 18–19 million barrels/day of oil (about 20% of world supply) and 20% of global LNG. Iran has threatened to close it in retaliation, which would be a “doomsday” scenario pushing prices toward triple digits. For now, shipping flows mostly continue, but heightened risk is bolstering the oil-price “risk premium” in case of escalation.
-
Direct Hits on Energy Infrastructure: Both sides have struck energy targets. Iran’s South Pars gas field (80% of its gas output) was damaged, and Israel reported fires at depots. Israel itself shut two of its three offshore gas fields (Leviathan and Karish), cutting domestic gas output by ~⅔ and forcing power plants to burn coal or oil. (Tamar gas field still runs, but Israel’s liquefied natural gas exports to Egypt/Jordan have been disrupted.)
In short, a small regional conflict now carries big global stakes. Analysts note that even talk of Hormuz disruptions can lift prices, as world oil suppliers hold this choke-point in their calculations.
Price Impact on Business Costs
Oil-price swings feed into many business expenses. Higher crude mainly shows up first at the pump: as a rule of thumb, a £8/barrel increase adds roughly 5p–7p per litre to UK petrol or diesel. But more expensive energy also raises costs across the economy. Fuel is a major expense for transport, so shipping and logistics costs rise. Fertiliser plants, farms, and factories use a lot of gas or power in production and processing, so their input costs climb when energy prices stay up. (For example, recent Israeli gas outages briefly halted Egyptian fertiliser production.)
- Short-Term vs Long-Term Effects: Brief oil price spikes have limited effects unless prolonged. After Russia’s invasion of Ukraine in 2022 sustained high oil prices fuelled global inflation. Today’s price (~£59/barrel) is far below those peaks, and analysts say recent rises are mostly priced in. Some warn prices could surge to £98/barrel if there is further disruption in the Strait of Hormuz.
-
Inflation Risks to Watch: A lasting energy shock could reignite inflation and stall growth. Though UK fuel prices are below last year’s highs, ongoing volatility—and rising gas costs—could push up electricity and heating bills.
Analysts highlight that the energy market today is different from the 2022 boom. Demand is weaker globally, and major producers such as Saudi Arabia, the US, and Brazil have unused capacity. This spare production ability could help keep prices in check if supply needs to increase. In essence, while prices remain volatile, the fundamentals of supply and demand may limit sharp price rises
How Black Sheep Utilities Can Help Your Business Navigate Energy Price Volatility
In times of energy market uncertainty, your business doesn’t have to face the challenges alone. Here at Black Sheep Utilities, we specialise in managing your energy procurement so you don’t have to.
Rather than scrambling to interpret complex market shifts or juggling multiple suppliers yourself, let our experts take care of it for you. We’ll review your current contracts, identify opportunities to fix prices or hedge costs, and explore alternative supply options tailored specifically to your business needs.
Our team stays constantly updated on market trends and geopolitical developments, so you get proactive advice—before costs rise further. We manage negotiations, supplier comparisons, and contract administration, freeing you to focus on running your business with confidence.
Book a callback with Black Sheep Utilities today, and let us help you secure the best energy deals and protect your business from unexpected cost increases. Don’t wait until prices spike.
GET IN CONTACT WITH US
How does the Israel-Iran conflict affect my business energy costs?
The Israel-Iran conflict has increased global energy price volatility, pushing up oil and gas prices. This affects fuel, transport, and energy-intensive industries, raising operational costs for businesses.
What risks do shipping choke-points like the Strait of Hormuz pose to energy prices?
The Strait of Hormuz is a critical passage for about 20% of the world’s oil and LNG supply. Any disruption or threat to this route can sharply increase prices due to fears of supply shortages. Staying informed about these risks helps businesses prepare for potential price changes.
Should my business be worried about short-term spikes versus long-term energy prices?
Short-term oil price spikes usually have limited lasting impact unless they persist. While current prices are elevated, they remain below 2022 levels. Sustained instability, however, could lead to ongoing higher costs.
How can Black Sheep Utilities help manage energy contracts during volatile market conditions?
Black Sheep Utilities specialises in managing energy procurement for businesses. We review your contracts, negotiate with suppliers, and find tailored solutions to protect your business from sudden price increases.
How can rising energy prices impact my overall business expenses, and how can Black Sheep Utilities support me?
Rising energy prices affect many business costs, including fuel, transport, and production. Black Sheep Utilities offers expert advice and personalised strategies to help control and reduce your energy spend, even during market volatility.
