Households across the UK are being warned to brace for higher energy bills this winter as European countries scramble to replenish their natural gas stores before the weather dips.
Wholesale natural gas prices are already at three-year highs, which could lead to increased energy bills for businesses and consumers.
Europe, which delayed its summer stockpiling due to high wholesale costs sparked by the Iran war, had been gambling the conflict would end before winter and prices would in turn fall.
Storage levels are significantly lower than usual for this time of year, with countries facing the prospect of rushing to buy gas now or paying potentially higher prices when the winter comes.
The European benchmark natural gas price topped €75/MWh on Wednesday, its highest level since late 2022, the tail end of a spike caused by Russia's invasion of Ukraine. Natural gas prices in the UK this week topped 185p per therm, also the highest since late 2022.
The price has jumped in the past week amid a return to hostilities between the US and Iran, with analysts fearing the renewed fighting will keep the key Strait of Hormuz closed even longer. Typically, around a fifth of the world's oil and liquefied natural gas (LNG) is transported through the waterway.
Hamad Hussain, senior climate and commodities economist at Capital Economics, said he did not expect the waterway to begin reopening until early 2027.
Even then, there will be a lag before energy is flowing freely through the strait and pressure on energy prices are eased.
"The risks to gas prices are definitely tilted towards the upside," Hussain told the BBC, warning that the gas price would top €80 by the end of this year.
Hussain recalled interviews with gas storage operators at the outbreak of the US-Israeli war in Iran saying they would wait three to four months for the crisis to ease before stocking up.
"We are about six months into the strait being effectively closed and that obviously has not happened," he added.
Higher wholesale gas prices feed through to household energy bills by helping determine regulator Ofgem's price cap.
The energy price cap rose in July, and will increase by 4% in October, leaving a typical household paying £1,723. But analysts at the energy consultancy Cornwall Insight have forecast domestic energy prices could rise a further 9% in the new year, bringing renewed concern to households during the coldest months.
Dr Craig Lowrey, principal consultant at Cornwall Insight, told the BBC on Thursday a fresh increase in wholesale prices would "increase pressure on our January price cap forecast".
However, he cautioned that there was "plenty of time to go" and a fall in wholesale prices could ease the pressure.
The Department for Energy Security and Net Zero (Desnz) said gas prices are determined on international markets, dismissing criticism of the UK's own low levels of storage.
The boss of British Gas owner Centrica, Chris O'Shea, has repeatedly called for support from the government to expand its Rough storage facility in the North Sea, warning it has been unviable to fill it up and that it will close next year without a deal.
"We have almost no gas in storage in the UK for the coming winter and this is a huge concern as energy security is national security," he said on LinkedIn, external last week.
A Desnz spokesman said: "We remain open to discussing proposals on all gas storage sites, as long as it provides value for money for taxpayers."
The department also pointed to Prime Minister Andy Burnham's pledge to cut VAT from energy bills from October, as well as government action to reduce Britain's reliance on natural gas altogether.
Ángel Talavera, chief European economist at Oxford Economics, said there is a "glass half full, and a glass half empty" picture unfolding.
On one hand, wholesale gas prices are significantly lower than during the crisis which followed Russia's full-scale invasion of Ukraine.
On the other, households and businesses will still face significantly higher energy bills than usual over the coming months.
"It's serious, but not catastrophic," he told the BBC, adding "something would have to dramatically change to lower prices".
He pointed to a reduction in demand for natural gas in general as a result of the shift towards renewables, but said the overall picture depends hugely on the winter weather.
"If you have a warmer winter than average, that will be great for demand," he said. But he warned a colder than average winter would have the opposite effect, driving up demand for energy and pushing up prices.
It is not known how the developing El Niño over the Pacific Ocean will impact Britain's winter. The so-called Big Freeze of winter 2009-10 was, at the time, the coldest in three decades - and this coincided with an El Niño.
However, 2006-07 was also an El Niño winter and that was unseasonably warm.
Talavera said gas prices could come down if the weather helps reduce demand and the Strait of Hormuz reopens sooner than expected.
But, at the moment, "the weather machine remains our main hope".
It comes as a recent spike in the UK government's borrowing costs eased. After a sharp uptick on Tuesday, which took the yield on a 10-year bond - or gilt - to the highest level since 2008, it fell back slightly on Thursday.
Yields are hovering around 5.15%, however, which would still represent a post-2008 peak were it not for Tuesday's jump.
