The Iran war has re-ignited familiar concerns about energy security, decarbonisation and the cost of living. Every day brings new headlines and fresh doubts about how and when the conflict might end, and what the war could mean long term for Iran, the wider Middle East region, and the global economy.

War in the Gulf also means further challenges here in the UK. To get a handle on the potential effects of the 2026 energy crisis in Britain, it is useful to look to lessons from recent history. Four years ago we found ourselves in a similar position, as fuel prices surged following Russia’s full-scale invasion of Ukraine.

Revisiting this episode can help clarify what might happen this time around, why it could be different, and how the 2026 crisis is partly a product of what happened in 2022.

The 2022 energy crisis was the product of a perfect economic and geopolitical storm. Global prices for natural gas, electricity and oil started to creep up during summer 2021, as economies around the world began opening up after Covid-19 lockdowns. Increased energy demand was then met with contracting fuel supply, as tensions ramped up between Russia and Ukraine. The stage was set for a crisis.

Following the invasion in February 2022, oil prices peaked at $133 per barrel, in part due to sanctions imposed against Russia (which curbed global supply).

The increase in gas prices was much more extreme. European natural gas futures – contracts to buy a unit of gas at an agreed price for a fixed period – topped out at €340 in August 2022, up from €70 before the war. The Nord Stream pipeline was cut off, hampering gas supply from Russia to Germany.

Ukraine itself also sits on major gas resources, particularly in the Kharkiv region, which was targeted extensively by the Russian military.

Lower global supply for both oil and gas led to higher bids for fuel, pushing up prices. Remember, energy demand was already on the way up as economies re-opened after the pandemic. Russia’s invasion created scarcity of several vital commodities precisely when demand for them was booming.

To get an idea of how Russian gas exports shifted following the invasion, let’s look at LNG imports. In 2021, the UK imported about 35,000 gigawatt hours of Russian gas. By 2022 this had fallen to just over 5,000 GWh – an 85% decrease.

At the same time, imports from other suppliers such as the United States and Norway increased. In 2021, the UK imported about 42,000 GWh of LNG from America. A year later this had risen to 138,000 GWh. As well as changing its suppliers, the UK also reduced aggregate LNG imports. In 2021, total imports were about 160,000 GWh. By 2024 this had fallen to 111,000 – a 31% decrease.

There were two prongs to what quickly became known as the ‘cost of living crisis’. The conflict in Ukraine quickly drove up energy prices in the UK. Ofgem raised the price cap by 54% in April 2022, from £1,277 to £1,971 for the average household.

In October 2022, the cap was set to jump to £3,549 – a further 80% increase. However, to protect households the UK government stepped in and introduced the Energy Price Guarantee (EPG). The EPG superseded the Ofgem price cap, and adjusted the level to £2,500. This meant the cap ‘only’ increased by 27%.

The government also provided households with a £400 rebate on their bills via the Energy Bills Support Scheme (EBSS). Unlike the price cap, this was a flat rate per account. Together with the EPG, this helped shield UK households from the sharpest edge of the crisis. However, the support package came at a substantial cost to the Treasury, weighing in at £24 billion for EPG and £11.7 billion for EBSS. This was equivalent to 1.3% of annual GDP – two-thirds of the UK’s defence budget.

Even with these support measures in place, many households struggled to make ends meet as the crisis unfolded. Data from Ofgem shows that in the first quarter of 2022, the average debt level for an account in arrears was £852 for electricity and £687 for gas. A year later these figures had jumped to £1,220 and £966, respectively.

Despite falling slightly during the crisis period, perhaps reflecting more account-holders being put onto repayment plans, by the end of 2025 the number of accounts in arrears for electricity stood at more than 1.1 million – up 48% since the end of 2021. The number of accounts with outstanding payments for gas grew by 54% over the same period.

It wasn’t just via their utility bills that people in the UK felt the impacts of the Russia-Ukraine war. The energy shock also turbocharged an already high-inflation period for the UK economy. In January 2022, the consumer prices index (CPI) was 5.5% – well above the Bank of England’s 2% target. By October of the same year, CPI hit 11.1% – the highest level in several decades.

To curb inflation, the Bank of England’s Monetary Policy Committee increased interest rates 14 times in a row from 2021 to 2023. In December 2021 the bank rate was just 0.25%: by the end of 2022 it was 3.5%, and by summer 2023 it peaked at 5.25%. This led to higher borrowing costs for households, including mortgage rates which rose sharply. Rental price growth also jumped, reaching 9.2% for the year ending March 2024.

From utility bills to groceries to rent, the 2022 energy crisis had a punishing impact on the cost of living in the UK. Despite policy interventions such as the EPG and EBSS, sustained high inflation (including for energy), together with the necessary monetary response, hammered living standards. Indeed, real wage growth – a good indicator of whether living standards are getting better or worse – was negative from April 2022 to May 2023. With prices growing faster than pay, the crisis hit many people where it hurts: their bank balances.

The 2022 energy crisis brought into sharp focus the dangers of fossil fuel reliance. It was a stark reminder that oil and gas orientated energy systems – including home heating – are vulnerable to geopolitical tensions.

At the same time, Russia’s invasion of Ukraine had a greater effect on gas prices than electricity. This meant that the invasion slightly ‘improved’ the economic case for electrification, because the price ratio – the relative price gap between the unit cost of gas and electricity – narrowed slightly. Put differently, the relatively large jump in gas prices meant that installing an electric heat pump became more attractive.

It was also around this time that policymakers began incentivising households to make the switch. In 2022, the government launched the Boiler Upgrade Scheme (BUS), which replaced the 2014 Domestic Renewable Heat Incentive (DRHI). BUS provided grants of £5,000 available for people swapping a gas boiler for an air-source heat pump. This was then increased to £7,500 in 2023.

Data from MCS shows that annual air source heat pump installations grew from 2021 to 2023. In 2021 there were 25,848 certified air source heat pump installations. By 2023 the annual figure had grown to 37,724 – a 45% increase over two years.

However, the tricky economic backdrop of high inflation, high interest rates and negative real wage growth posed two challenges for electrification. On the demand side many households were feeling the squeeze, while on the supply side heat pumps themselves became more expensive as manufacturers grappled with inflation within their supply chains. To take just one example, the price of copper wiring – a key component in an air source heat pump – jumped 130% between 2020 and 2022.

So, while the crisis improved the economics of running a heat pump through a lower price ratio, it also put pressure on both consumers’ wallets and heat pump suppliers’ bottom lines. Even so, the 2022 crisis acted as an alarm bell for fossil fuel reliance within the UK heating market, with many people switching away from gas heating during this period, perhaps partly as a result.

Let’s wind the clocks forward again to 2026 and look at how today’s situation compares with that of 2022. As it stands there is a tentative ceasefire in place but the Strait of Hormuz remains under a de facto blockade, with very limited shipping traffic passing through its waters. Oil prices remain elevated, with liquefied natural gas (LNG) supplies also heavily disrupted.

While it is still too early to see exactly how these latest fuel price shocks have affected UK energy costs (the current Ofgem price cap ‘protects’ bills until July 2026), recent predictions from Cornwall Insight suggest the price cap will rise to £1,836 in July. Whether there is a further rise in October is currently uncertain.

Starting with oil, the Brent Crude (Europe) benchmark price has increased by 70% since the start of the crisis, hitting about $138 per barrel in early-April – up from $72 in late February. This global price spike is starting to make its presence known in the UK. Take petrol and diesel, for example. Since the start of the crisis, pump prices for petrol have increased by about 20%, with diesel up 35%.

The price of urea (a nitrogen fertiliser) – a vital input for agriculture – also surged following the first military strikes. Prices remain very high, with urea futures currently up 75% since the start of the conflict. It remains to be seen how quickly this passes through to food inflation in the UK.

Turning to natural gas, European futures jumped by about 80% within a couple of days of the first US-Israeli strikes on Iran, peaking at around €70 per unit – up from €32 before the war.

Not all natural gas is disrupted equally. Following Russia’s invasion of Ukraine, the UK and EU started importing more LNG relative to pipeline gas (to diversify supply). This means the current surge in LNG prices poses a major risk to British and European supplies. Roughly 20% of the world’s LNG supplies pass through the Strait of Hormuz. As long as ships remain blockaded, supply will be constrained, putting upward pressure on prices.

At a glance the 2026 crisis looks similar to 2022. Prices for key inputs like fuel and fertiliser are up, with consumers starting to feel some of the effects. However, at least from a UK perspective there are some differences in the background economic conditions this time around – differences caused in part by the 2022 crisis and the government’s response at the time.

Starting with current macroeconomic conditions, in March 2026 the rate of inflation grew to 3.3% – up from 3% in the month preceding the war. According to the ONS, this was driven by higher fuel costs caused by elevated global oil prices. Even so, while it's still above target level, CPI is not nearly as high today as it was on the eve of Russia’s invasion.

In contrast, interest rates remain high, partly because of the experience of the 2022-2024 inflation surge. This means that many UK households in 2026 face much higher housing borrowing costs than they did four years ago. And even though inflation is ‘lower’, prices are still going up – just not as fast.

What about incomes? Today real wage growth is a modest 0.5%, similar to what it was in early 2022. It remains to be seen whether a potential new surge in inflation drags wages down below the zero line, shrinking people’s purchasing power.

Another key difference is the UK government’s fiscal position. Last time around, the state spent roughly £40 billion supporting households. The government has already indicated that it will not repeat this blanket approach. This is sensible: according to analysis by the National Institute of Economic and Social Research (NIESR), a similar package today would “ruin the precarious fiscal trajectory and spook an already febrile gilt market”.

The harsh mathematical reality of bond markets is a crucial factor shaping this current crisis. As gilt yields increase the government is obliged to pay more interest on its debt, shaving down budgets. According to NIESR, it is likely that recent movements in the yield curve have already wiped out roughly “half of the current £23.6 billion headroom the government has against its fiscal rules”.

This delicate fiscal position is partly the result of policies rolled out over the past few years. According to the IFS, high public debt and a twitchy bond market means a much more targeted approach is needed for “government [to] deliver support where it is needed in a more cost-effective manner”.

The recent energy crisis in 2022 and the ongoing crisis in 2026 point to a shared conclusion: greener energy is more secure energy. It is also less volatile. Moving away from fossil fuels is the best way for the UK to insulate itself from future geopolitical supply shocks, and reducing reliance on oil and gas has the potential to pay the double dividend of protecting both UK households and the public coffers.

The 2022 energy crisis added roughly 1.8% of GDP to Britain’s energy bill. According to a piece of analysis published in The Economist, “an equivalent disruption in 2050, with an economy that was mostly decarbonised, would add only 0.3%.” From an economic and energy security perspective it’s a no-brainer.

At the same time, a further spike in gas prices could further incentivise the move to electric home heating (via a lower price ratio). While headline energy costs are still the primary concern, the Iran crisis could end up moving the needle in such a way that the economics of running a heat pump become increasingly favourable relative to gas.

To make sure the country learns the lessons from 2022 and applies them in 2026, policymakers should focus on a three-pronged response to the crisis: a big push on low cost energy efficiency measures ahead of winter; speeding up electrification over the summer months; and using the crisis to introduce measures for energy bill stability over the long term. Such an approach is essential, particularly given the more delicate fiscal landscape we face four years on from the Russian invasion.

Despite its horrors and devastating human cost, the war in Iran could – at the very least – serve as a sliding doors moment for UK energy policy. A decisive move away from imported fossil fuels towards more renewables and electrified heating would offer a glimmer of hope amid the bleakness of the current conflict. If war is the ‘unfolding of miscalculations,’ then a long term, sustained and strategic plan for future energy security is the best defence against future chaos.

With additional contributions from Madeleine Gabriel, Marcus Shepheard, and Andrew Sissons

To keep up to date with our work on energy bills and the price ratio, follow A sustainable future at Nesta on Linkedin.