What global events could mean for business energy costs

Energy markets can change quickly - especially when global events affect supply. Recently, rising tensions in the Middle East have introduced fresh volatility into international energy markets, which can influence wholesale gas and electricity prices here in the UK.

For businesses on variable energy contracts, this kind of market movement can have a direct impact on energy costs. Understanding what’s happening - and how to manage that risk - can help you make more informed decisions about your energy supply.

Why global events affect UK energy prices

The Middle East plays a major role in global energy supply, particularly when it comes to oil and liquefied natural gas (LNG). When tensions rise in the region, energy markets often react quickly due to concerns about potential supply disruptions.

Even the possibility of reduced supply or shipping delays can push wholesale prices up, as traders respond to uncertainty and risk in the market.

Although the UK produces some of its own energy, it is still connected to global markets. This means international developments can influence the wholesale prices that suppliers pay for gas and electricity.

Why gas prices matter for electricity too

In the UK, gas plays an important role in electricity generation. Gas-fired power stations are often used to meet demand when renewable generation isn’t sufficient, and the cost of gas frequently helps set the wholesale electricity price.

As a result, when gas prices rise, electricity prices often increase as well.

This relationship means global gas market volatility can affect a wide range of businesses - even those that primarily rely on electricity.

What this means for businesses on variable energy products

If your business is on a variable or market-linked energy tariff, your rates may change as wholesale market prices move.

When markets are stable or falling, variable pricing can sometimes offer savings. However, during periods of geopolitical uncertainty or supply disruption, wholesale prices can rise quickly - and that can feed through to your energy costs.

For small and medium-sized businesses in particular, sudden price increases can make budgeting and forecasting more difficult.

How fixed contracts can help provide stability

Many businesses choose a fixed energy contract to help manage this type of risk.

With a fixed contract, the wholesale element of your tariff is fixed upfront and remains the same for the duration of the contract. This protects your business from short-term fluctuations in the market and makes it easier to plan energy costs with confidence.

While no one can predict exactly how energy markets will move, fixing your rates can provide valuable certainty - particularly during periods of global volatility.

We’re here to help you plan ahead

Energy markets are influenced by a wide range of factors, from weather and demand to global politics and supply disruptions. Our team continually monitors these developments so we can support our customers in navigating the changing energy landscape.

If your contract is coming up for renewal, or if you’re currently on a variable tariff, now could be a good time to review your options.

A fixed contract may help protect your business from unexpected market movements and provide greater certainty over your energy costs.

Get in touch with our team today to explore your options and find the right energy solution for your business, either by phone on 01903 703423 or email customercare.business@smartestenergy.com