UK could face three-day working week if war in Iran continues for too long

Oil prices are now over $100 per barrel as the conflict between the United States, Israel and Iran continues to rumble on.

Benchmark Brent crude – the international benchmark for oil – is now $107 a barrel, a price not seen since the summer of 2022.

Though China and Russia face risks of energy supply loss after the attacks in Iran, there are ‘greater risks’ for the UK and Europe than for America.

The UK has just 1.5 days of demand, according to new data published by National Gas, and is now paying the highest wholesale gas prices in Europe as supplies from the Middle East dry up.

Queues for petrol stations are mounting, with some stations in Manchester running out – with fears that the situation could worsen as people panic buy.

Dr Robert Johnson, Senior Research Fellow at Pembroke College in Oxford, told Metro that if the current situation worsens, it could end up somewhat similar to the 1973 oil shock in Britain.

In 1973, Arab members of OPEC halted shipments to the US and other nations that supported Israel during the Yom Kippur War.

‘That led to a three-day work week, lost jobs, and shut industries,’ Dr Johnson told Metro.

‘There is a risk that a prolonged war could do that again, particularly when the UK government has decided to tax its own North Sea energy companies at a rate of 78%. The economics of this are as important as the military operations.’

Here’s what could happen if the price of crude oil continues to skyrocket in the coming days and weeks.

Panicked buying leads to shortages

Jan Rosenow, Leader of the Energy Programme and Professor of Energy and Climate Policy at the Environmental Change Institute of Oxford, pointed out that mass panic-buying petrol in the UK is behavioural, but notes that the UK does have petrol stocks for a few weeks to match normal consumption rates.

‘Nothing about the Strait of Hormuz closure has changed that overnight,’ he told Metro.

‘What we are seeing in Manchester and Norfolk is the same feedback loop we saw in 2021 during the HGV driver shortage: once queues appear on social media, rational individuals rush to fill their tanks, which creates the very shortage they feared.

‘The irony is that the people driving to the queue are, in aggregate, the cause of the problem they are trying to avoid.’

Gas prices and fuel prices continue to climb

Until the situation in Iran calms down and the Strait of Hormuz is secured, gas prices in the UK and around the world could continue to climb.

This morning, the RAC’s head of policy, Simon Williams, said petrol is up 5p to 137.5p and diesel up 9p to 151p a litre since Saturday, February 28.

Prior to the US’s strikes in Iran, petrol cost 132.83p per litre and diesel cost 142.38p a litre.

He added: ‘Average petrol and diesel prices have rocketed in the last week and are unfortunately likely to keep on rising, so the situation for UK drivers is looking increasingly bleak.

‘With oil at a sustained $100, petrol could rise towards 150p a litre – a price not seen since June 2024. Diesel could reach almost 180p, which would be a three-year high.

‘We encourage drivers to continue filling up as normal but to shop around for the best prices using apps like myRAC as there can be big local differences between forecourts. Driving fuel efficiently by avoiding harsh accelerating and braking and ensuring tyres are inflated to the right pressures can help eke out every last mile and save money.’

Qatar’s energy minister, Saad al-Kaabi, warned it would take ‘weeks to months’ to return to its normal delivery pattern of petrol after Iranian strikes crippled liquefied gas plants.

Goldman Sachs has predicted the price of oil could skyrocket further in the meantime, up to as much as $150 per barrel by the end of the month.

Mr Rosenow told Metro: ‘The UK is exposed, more than we should be, and more than we need to be. The UK gets most of its gas from Norway and the North Sea, not directly from the Gulf.

‘But that does not protect us. Global LNG markets are integrated. When Gulf supply tightens, prices rise everywhere, regardless of where your molecules physically come from. We felt this in 2021 and again in 2022. We are feeling it again now.’

Gas prices steady and begin to decline

Another possibility is that crude oil prices begin to steady out before declining again – at least, that’s what the US government believes.

US Energy Secretary Chris Wright said the spike in energy prices will last just weeks, adding that the US has ‘no plans to target Iran’s oil industry, their natural gas industry, or anything about their energy industry.’

But Israel has already struck oil refineries in Tehran and Karaj in Iran, sending plumes of smoke into the sky and crippling the industry.

Iranian strikes have also targeted neighbouring Gulf Countries, in Qatar and the UAE.

‘If you can tolerate oil at more than $200 per barrel, continue this game,’ the Iranian Revolutionary Guards Corps said yesterday, threatening to continue striking oil facilities in other Gulf Countries.

Who benefits from oil price increases?

It was ever thus – the wealthiest 1% are those who reap the benefits of increased oil prices.

Working people are the ones hit hardest, with household bills set to rise sharply if the price of crude oil does not go down soon.

When the next quarterly energy price cap goes into effect in July, the increase in household bills could affect it greatly.

In addition to household prices increasing, transport and food costs could also go up.

‘Elevated gas pushes up production costs in two key ways: higher energy and fertiliser costs. Natural gas is a major input to ammonia and nitrogen fertiliser, so sustained high gas raises fertiliser prices and, with the planting season approaching, that feeds through into crop costs and ultimately retail food prices,’ he said.

‘By contrast, petrol shortages from panic buying are likely to be shorter-lived if distribution normalises; fuel pump prices will spike and squeeze households now, but food price effects can be more persistent and lagged.’

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