Oil prices jumped sharply on Monday after US and Israeli strikes on Iran escalated tensions in the Middle East, disrupting regional crude supply.
In the first trading session since the attacks began, Brent crude rose by as much as 13% to $82.37 a barrel before easing to trade around 5% higher in London.
The oil price spike comes just days before Rachel Reeves’ Spring Statement, amid speculation that the Chancellor could move to end the Energy Profits Levy earlier than planned — a decision that would unlock huge investment in the North Sea.
Shipping activity through the Strait of Hormuz, the critical waterway through which around a fifth of global oil and gas flows, has slowed significantly following the strikes int he Middle East.
Tehran’s retaliatory action against Gulf neighbours has also raised concerns over key regional energy infrastructure.
UK political pressure
The market volatility comes at a time of mounting political pressure over UK energy security.
The Financial Times reports that a cross-party group of eight former energy ministers — including former Conservative energy secretary Amber Rudd and former Labour business and energy secretary Lord John Hutton — has written to Keir Starmer warning that current restrictions on North Sea production are worsening energy security.
They argue that the decline in domestic oil and gas output is driven more by policy than geology and have urged ministers to end the energy profits levy sooner and lift the ban on new exploration licences. The group also wants approval granted to the Rosebank and Jackdaw oil and gasfields.
Former Tory energy minister Charles Hendry told the Financial Times that restricting new drilling would “only increase our energy imports”, despite the UK still relying on oil and gas for around 75%of its total energy needs.
Labour ministers maintain that the North Sea is in long-term decline and argue that future energy security lies in accelerating renewables and carbon capture. Ed Miliband has said expanding drilling would not materially reduce household bills because prices are set on global markets.