Global energy prices have spiked alarmingly again, driven largely in recent days by the escalating conflict between Yemen’s Houthis and Saudi Arabia causing chaos for the oil industry.
Petrol and diesel costs have risen rapidly in most countries while the wholesale price of natural gas – used for heating homes and generating electricity – has almost doubled in the UK and Europe since July.
There are growing concerns of another inflationary shock on the world economy, which could cause interest rates to rise, increase mortgage costs and raise the price of almost everything in the shops including food.
So what is behind this latest surge – and what are the implications for the world economy?
Petrol, diesel and gas prices are rising
The global oil price is currently above $108 (£80) per barrel, up from $70 (£52) in June 2026 – a roughly 50% increase.
This has contributed to average petrol prices in the UK going above 170p a litre, the highest since 2022 and up from 150p in July.
As a result of the near-doubling of UK natural gas costs alongside this the domestic price cap set by energy regulator Ofgem is forecast to rise by 25% in January next year – or about £440 a year for a typical household.
In the US, the cost of a gallon (3.8 litres) of petrol has risen from $3.80 (£2.82) in July to $4.32 (£3.20), according to the AAA Gas Prices index.
Diesel prices have hit a record level in the US of more than $6 (£4.46) a gallon, higher even than after Russia’s full-scale invasion of Ukraine in 2022.
What’s pushing up prices?
Analysts say the main driver has been a reduction in global oil and gas supplies.
Before the US-Israeli war with Iran began in late February, about 20% of both global oil products and liquefied natural gas supplies passed through the Strait of Hormuz, a narrow waterway connecting the Gulf and the Arabian Sea.
This flow of energy collapsed after February due to Iranian attacks on commercial shipping and the energy facilities of US allies in the Gulf as well as a US blockade of Iran’s ports.
After the war began, Saudi Arabia stepped up the use of its East-West pipeline – which according to maritime intelligence firm Kpler has a capacity of 3.6 million barrels per day – to export oil via the Red Sea, rather than the Strait of Hormuz.
But the pipeline was forced to shut down after it was attacked by drones on Friday, which Saudi Arabia has blamed on Iran-backed militias in Iraq.
The Houthis separately attacked several Saudi oil facilities with drones and missiles last week, causing fires which led to operations being temporarily halted.
Neil Quilliam of Chatham House said the pipeline could be closed for up to eight weeks for repair – although US Energy Secretary Chris Wright told broadcaster CNBC on Tuesday it will start operating again “very soon”.
And despite the US government insisting fuel is flowing through the Strait of Hormuz in roughly pre-war volumes, most independent analysts judge that the waterway remains significantly obstructed.
Before the war around 21 million barrels per day of oil and oil products were passing through the Strait of Hormuz, according to the US Energy Information Administration.
But Kpler estimated this had fallen to about 8.6 million barrels per day by the end of August.
Over the past two weeks, the Houthis in Yemen have captured strategic territory from Saudi-backed pro-government forces close to the Bab al-Mandab Strait, another trade chokepoint at the southern tip of the Red Sea which was the transit point for about 5% of global oil supplies before February.
About 5% of the global oil supply also normally leaves the Red Sea through the north, via the Suez Canal and a pipeline across Egypt to the Mediterranean.
The global market oil price is rising over concerns these shipping arteries could, like Hormuz, be even more severely disrupted by Iran and its proxies.
Before the Houthis recent advances on the south-west coast of Yemen the group declared in July it was enforcing a naval blockade of Saudi ships and ports. It said it will not attack vessels from other countries passing through the Red Sea.
US President Donald Trump has said “the world’s diesel price rise is mostly caused by the Russia/Ukraine War, not Iran”.
Analysts say the conflict – including Ukrainian drone attacks on Russian refineries – has put pressure on diesel prices as Russia is the world’s second largest diesel exporter.
