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That’s all from us today, but you can follow all our latest business and economics news here.
We may need to cut our energy use, says Fed rate-setter
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Families and businesses may need to use less energy if Iran’s blockade of the Strait of Hormuz continues much longer, a Federal Reserve rate-setter has warned.
Dallas Fed President Lorie Logan, who votes on the Federal Reserve Open Markets Committee (FOMC), said on Wednesday that the world may need to find a way to get by on less oil and gas if pressures on energy supplies do not ease soon.
Ms Logan told a conference at the Bank of Japan: “With supplies highly constrained, if shipping through the strait does not soon return to prewar levels, world oil and natural gas consumption could need to fall more meaningfully than it has so far.
“One way or another, I expect energy markets to come into rough balance before too long.
“If the molecules aren’t available, the world can’t consume them.”
Jenrick promises to cut prices
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Reform UK would knock £200 off household energy costs by slashing VAT and other levies on bills, Robert Jenrick has said.
In response to the energy price cap rise, the party’s shadow chancellor said: “Reform UK will cut your bills.
“If Reeves won’t do it, in our first budget we’ll scrap VAT and the green taxes and levies on your energy bill, and save you £200 a year.”
— Robert Jenrick (@RobertJenrick) May 27, 2026Reform UK will cut your bills.
If Reeves won't do it, in our first budget we'll scrap VAT and the green taxes and levies on your energy bill, and save you £200 a year. pic.twitter.com/6cSFtQSuY7
‘End de facto ban on air conditioning’
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Britain must overturn its “de facto ban” on air conditioning as temperatures hit record highs, according to the Shadow Energy Secretary.
Claire Coutinho called for the Government to overturn “miserabilist” building regulations that mean developers can only install air conditioning units in new homes as a last resort.
She said: “It’s time to end the de facto ban on air conditioning.
“Only 3pc of British homes have air con compared to 90pc of homes in the US, or Japan.
“We need to overturn our miserabilist approach to energy which says we alone can’t have air con or AI.”
— Claire Coutinho (@ClaireCoutinho) May 27, 2026It's time to end the de facto ban on air conditioning.
Only 3% of British homes have air con compared to 90% of homes in the US, or Japan.
We need to overturn our miserabilist approach to energy which says we alone can't have air con or AI.
Let's Make Britain Cool Again 🇬🇧 pic.twitter.com/T3Mq20daR1
Oil prices down
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Oil prices have fallen by more than 3pc after Donald Trump touted progress towards a peace deal with Iran.
The price of Brent crude fell to $96.35 on Wednesday, despite an ongoing exchange of strikes, as the US President and his Cabinet insisted negotiations are moving forward.
Gilt yields fall
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UK borrowing costs have dropped on hopes of a peace deal between the US and Iran.
Yields on 10-year gilts, the benchmark for UK government borrowing costs, fell by more than 0.05 percentage points on Wednesday to 4.82pc.
This was the lowest level in more than a month and was down from a peak of 5.17pc earlier in May.
Yields on 30-year gilts also fell by 0.05 percentage points to 5.5pc, down from a peak of 5.85pc earlier this month.
This was part of a wider fall in bond yields across Europe, with yields on 10-year German bunds falling by 0.02 percentage points to 2.95pc and yields on 10-year French bonds dipping 0.03 percentage points to 3.57pc.
Investors are hoping that US President Donald Trump could be getting closer to a resolution to the conflict, which would allow global energy flows to recover.
‘Just scrap the standing charges’
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What’s your view on the energy price cap rise? Telegraph readers have their say:
UK stocks dip
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The FTSE 100 fell marginally by 0.1pc in early trading on Wednesday, as oil stocks and utilities dropped.
Energy companies Centrica, SSE, Drax and Shell fell by 1.8pc, 1.2pc, 2pc and 2.4pc respectively. National Grid also dropped by 1.3pc.
BP, which plunged yesterday after the news that the firm’s chair Albert Manifold had been sacked by the board after only eight months in the role, slumped by another 1.6pc.
The FTSE’s lack of tech stocks mean it is missing out on wider rises across Europe, with the Euro Stoxx 50 rising by 0.6pc.
The French CAC 40 climbed by 0.4pc and the German DAX rose by 0.7pc.
Risk of higher mortgage rates
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Homeowners are at risk of higher mortgage rates as energy prices drive up interest rate expectations, AJ Bell has warned.
Sarah Coles, head of personal finance at the investment platform, said: “The impact of the change doesn’t start and end with the bills themselves. The rise in July will also feed through into inflation figures.
“By then we’re likely to see higher fuel costs power broader price rises. The Bank of England is tasked with keeping inflation at 2pc, which is why the market has been pricing in two interest rate rises by the end of the year.
“It means anyone on a variable rate mortgage could see their monthly payments get more expensive. Those who are on a fixed rate and coming up for a remortgage may also see deals get pricier, especially if inflation comes in hotter than expected.”
The average rate on a two-year fixed-rate deal on Tuesday was 5.73pc, up nearly a whole percentage point from 4.83pc before the war began, according to Moneyfacts.
Badenoch blames net zero agenda
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Kemi Badenoch has blamed Ed Miliband’s net zero agenda for soaring energy bills.
The Tory leader hit out at the Energy Secretary in her response to a £221 increase in household energy bills as the war in Iran drives up energy costs.
Mrs Badenoch said: “Energy bills are rising again. Labour will blame Iran, but you’re paying more because of Ed Miliband’s net zero taxes and refusal to drill our own oil and gas.
“Our cheap power plan would cut bills by 20 per cent by scrapping the green taxes, scrapping VAT, and drilling in the North Sea.”
— Kemi Badenoch (@KemiBadenoch) May 27, 2026Energy bills are rising again. Labour will blame Iran, but you're paying more because of Ed Miliband's net zero taxes and refusal to drill our own oil and gas.
Our Cheap Power Plan would cut bills by 20% by scrapping the green taxes, scrapping VAT and drilling in the North Sea. https://t.co/fd71HD8g7K
Calls for Targeted Energy Discount scheme
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Ministers should develop an energy discount scheme for low income households ready for a winter energy shock, the Resolution Foundation said.
Warm summer weather will limit the immediate impact of what is the largest energy price cap rise since the 2022 energy crisis, but the Government needs to prepare targeted support in time for higher heating demand, according to the think tank.
After adjustments for inflation, energy bills will be 20pc higher from July than before the pandemic began in April 2019.
But because gas consumption is at its lowest during the summer months, the typical cost of energy used over the summer will only be £21 higher over the three months than if prices had remained unchanged.
The bigger problem will be what happens when temperatures drop and the Government should build a Targeted Energy Discount (TED) scheme to support vulnerable households who could get hit by a winter cost surge.
Jonathan Marshall, Principal Economist at the Resolution Foundation, said: “The Government is right to have resisted pressure to act and should save its fiscal firepower in case the Price Cap rises further in the winter.
“Ministers should use the coming months to prepare a scheme that is targeted at vulnerable households, temporary in order to rein in costs, and timely so that it’s ready for when the temperature drops.”
Bills will get even higher
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The energy price cap will rise even higher to £1,899 per year in October, a leading analyst has warned.
Households will face another 2pc increase when Ofgem sets its next price cap from October to December, according to Cornwall Insight.
This will hit just as temperatures fall and household energy use rises as families turn their heating on.
Craig Lowrey, principal consultant at Cornwall Insight, said: “The rise in July energy prices will be felt across households already stretched by the cost of living, and even though it was widely anticipated, that does not make it any easier to bear.
“Even more concerning is October, where our forecasts are already pointing to a further rise landing just as people start to turn their heating back on for winter.”
Mr Lowery warned that hopes that prices will quickly return to normal if the conflict ends soon are overly optimistic.
He said: “The damage to infrastructure, the disruption to supply chains and the erosion of market confidence will not unwind overnight, and the impacts could be felt in bills for longer than many expect.”
The October figure will not be confirmed until August.
‘Likely we are going to see elevated prices this winter’
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Households worried about higher prices this winter should consider fixing their energy tariffs as the conflict in the Middle East drags on, the boss of Ofgem has said.
Speaking on BBC Radio 4’s Today Programme, chief executive Tim Jarvis said: “It is a time where it gives people an opportunity to try and prepare for what may be coming in the winter and they might do that by trying to fix in the market for example, and try and insulate them against some of that volatility.
“You’ve obviously got the risk there that if prices do come down, but it is likely that we are going to see elevated prices this winter. We’re not at the moment seeing the sort of price rises that we saw following the Russia-Ukraine war, but it remains a very uncertain situation.”
The outlook for future prices will largely depend on what happens in the Middle East and how quickly trade through the Strait of Hormuz can recover, Mr Jarvis said.
“It is unfortunately now looking like a more long term disruption to markets than we might originally have hoped.”
Larger energy debt crisis looms
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A higher price cap will intensify pressure on households who are already grappling with an energy debt crisis, StepChange has warned.
The debt charity said one in four of its clients spent more than 20pc of their net income on energy bills in April, while they were still protected by the lower price cap.
Nationally, total energy debt has climbed by 18pc year-on-year and now totals nearly £4.6bn.
Each of StepChange’s clients have average energy arrears of £2,646 in the year to date.
The charity’s chief executive Vikki Brownridge said the price cap will hit household budgets at a time when families are struggling.
She said: “The reality is that despite the reduction in usage over the summer months, this is another kick in the teeth for consumers already struggling to make ends meet. The prospect of managing these bills come winter will be a worry for millions.
“As we have seen our own clients’ energy debt almost double since 20213, the reality is that without urgent action this stands to only grow further – a rise on an existing pile of debt.
“To prevent an energy affordability crisis and further acceleration in energy debt this winter, the government must provide targeted support through a social tariff which builds on the Warm Home Discount Scheme, and work with Ofgem to implement an effective Debt Relief Scheme to support customers with energy debt to repay affordably.”
Mounting affordability concerns
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Bigger problems are coming for households later in the year when demand for energy rises during the winter months, KPMG has warned.
Clare Maio, global lead partner at the accountancy firm, said:
“Consumers have been bracing for higher energy prices ever since the war in Iran broke out, with this increase putting further pressure on already stretched household budgets.
“While the current sunnier weather provides some relief as households historically use less energy over the summer months, it heightens concern about affordability later in the year when demand rises again.
“The key question now is what the Government’s anticipated targeted support looks like come October and which households are likely to benefit.
“With suppliers still tackling mounting energy debt from the last energy crisis, there is growing urgency to pair short-term assistance for those households most in need with longer-term measures that improve energy efficiency across the board and diversifies our energy sources to reduce exposure to future price shocks.”
Price rise due to ‘continued volatility in global energy markets’
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The rise in the price cap is because the war in Iran is driving up global energy costs, the boss of Ofgem has warned.
Chief executive Tim Jarvis said:
“Today’s price change reflects continued volatility in global energy markets. This means higher wholesale gas prices, driven by ongoing conflict in the Middle East, is impacting the price we pay for energy.
“We understand many will be concerned about rising prices. While energy use typically falls over the summer months, there are still practical steps households can take to manage costs, including exploring fixed tariffs or changing their payment method. Smart meter customers can also take advantage of half price or cheap electricity at the weekends.
“While our energy supplies remain secure, the best way to limit this exposure is by investing in our energy network. That’s why we’re unlocking the funding needed for the biggest transformation of our lifetime to deliver a system that is secure, resilient, and works for consumers across Great Britain.”
Households will pay an extra £18 per month
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Household bills will rise by £18 per month if the Ofgem new price cap is sustained for a year.
Customers will see a 5pc increase in their electricity bills and a 24pc increase in their gas bills from July as the war in Iran drives up prices.
Electricity prices will rise by less than gas prices because of increased renewable energy generation which has reduced the UK’s reliance on gas to produce electricity.
The price cap is the default charge for customers who have not signed up for fixed-rate tariffs. It sets a maximum rate per unit and standing charge.
The increase is because the war in Iran has driven a surge in the price of wholesale gas, which has jumped by 52pc since the conflict in the Middle East began.
However, gas prices are still far lower than during the height of the 2022 energy crisis, when the government had to step in to cap bills at £2,500.
Around 40pc of UK households - some 22 million - are on fixed tariffs and are therefore unaffected by this price rise.
Ed Miliband insists on net zero push
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Ed Miliband has insisted Britain must go “further and faster” with his net zero push after the energy price cap increased by an average of 13pc.
Mr Miliband, the Energy Secretary, said the rise was down to the war in Iran and called it “deeply unwelcome news” for households across Britain.
He said: “We know people were under pressure before this crisis, and that’s why easing that burden is our number one priority. We will continue to monitor the situation ahead of the winter and plan for all contingencies.
“In the immediate term it is essential to de-escalate this conflict to bring oil and gas prices down and as Britain faces the second fossil fuel crisis of this decade, we must learn the right lessons.
“The way to get bills down for good and avoid these price spikes is to go further and faster with this government’s drive for clean homegrown power we control.”
— Ed Miliband (@Ed_Miliband) May 27, 20261/ The rise in the price cap because of a war we did not choose is deeply unwelcome news for households across the country.
We know people were under pressure before this crisis, and that's why easing that burden is our number one priority.
Good morning
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Thanks for joining me. Ofgem has raised the energy price cap on annual household bills by a higher than expected £221.
It is the first time the war in Iran is flowing through to household energy bills, which until now were shielded by the lower cap set in April.
5 things to start your day
1) BP is once again gripped by ‘embarrassing’ boardroom drama | Investors’ concerns grow after the oil giant ousted its chairman over claims of ‘bullying’
2) Dubai cash flowed into British shadow bank days before collapse | Abu Dhabi lender made loans secured against properties owned by individuals linked to insolvent firm
3) People earn less after seeing government job coaches | New ONS study finds that employees suffer a £160 monthly fall in their income
4) Gary Lineker expands media empire with YouTube channel investments | Former footballer’s podcast company to partner with brands producing economics and cricket content
5) South East Water under fire after taps run dry during heatwave | More than 1,000 customers in Kent and East Sussex left without supply over bank holiday weekend
What happened overnight
Wall Street soared to record highs on the back of a boom in memory chip stocks, as chipmakers race to keep up with AI demand.
The rise was led by Micron Technology, which surpassed a $1trn market capitalisation for the first time after its shares jumped by 19.3pc.
Enthusiasm for stocks tied to AI infrastructure offset anxiety over Iran peace negotiations, which were put to the test on Tuesday after US air strikes on Iran late on Monday.
Although the Dow Jones Industrial Average edged down by 0.2pc at market close, the S&P 500 closed 0.6pc higher while the tech-heavy Nasdaq climbed 1.8pc, with each hitting record levels.
Oil prices were mostly steady in early Asia trading. Brent crude closed up nearly 4pc to over $99 per barrel, while West Texas Intermediate, the US benchmark, traded above $93 per barrel.
Stocks in the Asian markets looked set to make gains, signalling that traders are remaining upbeat about the prospect of a peace deal despite Monday’s military attacks.
Futures tied to Japan’s Nikkei 225 and mainland China’s CSI 300 indexes were each trading around 0.5pc higher early on Wednesday, while those linked to Hong Kong and Australia were largely flat.