How is the Energy Market Being Affected by the Iran Conflict – and How Can You Control the Cost?
Energy markets remain volatile, creating a difficult choice for businesses trying to secure future gas and electricity costs. Helen Garner (Utility works) and Robin Preston (Energy Group Holdings) examine the risks of waiting, the limitations of trying to time the market, and how flexible energy contracts can provide a more controlled approach.
A return to uncertainty
Businesses had only recently begun to emerge from the energy crisis, with prices steadily declining and greater confidence returning to the market.
That changed dramatically on 28 February 2026, when military action by the United States and Israel led to significant disruption across global energy markets. The closure of the Strait of Hormuz removed expectations of increased LNG supply to the global market and left LNG carriers, oil tankers and container vessels unable to use one of the world’s most strategically important shipping routes.
The Strait is the only maritime access point for several Gulf nations, including the UAE, Qatar, Bahrain, Kuwait, Oman and Iraq. Qatar, the UAE and Oman collectively account for approximately 20% of global LNG supply, meaning any sustained disruption in the region has significant implications for international energy markets.
For businesses that had not already secured their future gas and electricity requirements, the situation created an uncomfortable dilemma: wait in the hope that the disruption would be short-lived, or secure prices while the market was already responding to the uncertainty.
What does the volatility mean for energy buyers?
A fragile memorandum of understanding has subsequently provided some temporary stability, but renewed attacks on shipping and retaliatory action have once again increased uncertainty. The market has already reacted, with gas prices increasing by more than 5% on average and electricity by more than 2%. However, the bigger issue for energy buyers is volatility.
When markets become uncertain, suppliers have to account for the additional risk involved in offering fixed prices. A time premium is already built into fixed-price contracts to allow suppliers to hold a price while a customer makes a decision and completes the contracting process. When markets become volatile, that premium can increase as suppliers seek to protect themselves from further movement.
Ultimately, that additional cost is passed back to the customer.
The problem with waiting for the ‘right’ price
For businesses needing to secure energy for the year ahead, there are broadly two approaches. The first is to wait. This is an understandable position. If prices have recently increased, there may be a temptation to delay a purchasing decision in the hope that the market will settle and prices will fall again. The problem is that nobody knows when the lowest point will be reached.
Waiting may deliver a lower price, but it may equally expose a business to another unexpected event that pushes the market higher. The longer a purchasing decision is delayed, the greater the uncertainty around what happens next.
It can therefore feel like a no-win situation: commit now and prices could fall later; wait and they could rise further.
Taking value out of the market
An alternative approach is to focus less on predicting the absolute lowest price and more on securing good value when opportunities arise. We often describe this as ‘taking value out of the market.’
The question to ask is simple: when will the cheapest possible price actually be available? The reality is that we only know where the lowest point was after the market has passed it. Trying to identify that point in advance is therefore effectively a gamble.
A more controlled approach is to identify periods when the market offers an acceptable level of value and secure some of the energy requirement at those prices. This is where a flexible energy contract can play an important role.
Why flexibility can provide greater control
A flexible energy contract provides a framework for purchasing energy at different times and in different volumes, rather than requiring a business to commit its entire requirement at a single price and point in time.
That means a business can secure smaller or larger volumes when market conditions are favourable, while continuing to monitor what happens to the market.
For example, attractive prices for future delivery periods can be secured now, providing a degree of protection and certainty. If prices subsequently fall, further requirements can potentially be purchased at those lower rates. This doesn’t remove risk, but it allows that risk to be managed rather than simply accepted.
There are also different strategies that can be adopted within a flexible contract, depending on an organisation’s objectives and appetite for risk. A flexible arrangement can ultimately be converted into a fixed-price contract by locking in all of the relevant pricing components when the timing is considered right.
The important point is that flexibility does not mean leaving everything open. It provides a framework for making purchasing decisions progressively, based on market conditions.
A different way to manage energy risk
In a volatile market, the instinct can be to wait for certainty. But certainty may only arrive after the opportunity has passed.Rather than trying to predict exactly where energy prices are heading, businesses can consider how they want to manage the risk of different market outcomes.
A flexible energy contract can provide that framework. It allows organisations to secure value when opportunities arise, protect parts of their future requirement, and retain the ability to respond if market conditions change.
For organisations facing significant energy costs, the objective should not necessarily be to buy at the lowest possible price. It should be to develop a purchasing strategy that provides an appropriate balance between cost, certainty, flexibility and risk.
In an uncertain market, having a strategy for making those decisions can be considerably more valuable than trying to predict what happens next and for businesses that have a renewal further out – from 2027 onwards – having a flexible framework in situ ensures that you can take advantage of future market positions where it’s not as affected by the current market fundamentals, thus avoiding current volatility and risk.
About the authors
With 22 years’ experience in the energy industry, Helen helps businesses navigate an increasingly complex procurement landscape. She has worked across a range of procurement products, helping businesses understand policy, market conditions and contract options while providing transparent and unbiased advice. Having worked across both consultancy and supply, she brings together cost, efficiency, sustainability and compliance to create practical strategies centred on clients’ business objectives.
Robin has spent the past 25 years in the energy industry, initially collaborating with major suppliers before moving into independent consultancy. He has worked with some of the UK’s and the world’s largest brands and energy consumers, helping them integrate energy procurement contracts with energy efficiency, ESG and renewable generation in a cost-effective way. Robin supports businesses to implement these strategies and understand their implications.
