UK borrowing climbs as Iran‑related gas supply shock erodes last year’s fiscal gains

The Treasury announced today that the United Kingdom will increase its borrowing for the current fiscal year, a reversal of the modest deficit reduction achieved in the previous twelve months, because the price of oil and gas has been pushed upward by the ongoing conflict involving Iran, a development that underlines the fragility of a fiscal strategy that depends on volatile commodity markets.

In the early hours of Thursday, the month‑ahead UK wholesale gas contract rose by 3.25 percent to 112 pence per therm, marking the highest level recorded in over a week, a movement that reflects not merely a temporary market jitter but a broader European need to secure roughly 54 billion cubic metres of gas before the 2026‑27 winter heating season, a requirement that had previously seemed manageable thanks to an anticipated 45 billion cubic metre addition of liquefied natural gas capacity slated for 2026.

That optimism has since been undermined by a series of downward revisions to supply forecasts: Qatar’s projected expansion of LNG output appears unlikely to materialise in 2026, the strategic Strait of Hormuz blockade has removed an estimated eight billion cubic metres of gas from the global market each month, and approximately 17 percent of Qatar’s existing capacity is reported to be offline for an indeterminate period due to war‑related damage, a combination that collectively erodes the very foundations of Europe’s gas‑security calculations.

The resulting confluence of higher energy prices and constrained supply has forced policymakers to compensate through increased public borrowing, a response that not only highlights a systemic over‑reliance on precarious external energy sources but also illustrates the predictable shortfall of contingency planning within both national budgeting processes and broader European energy strategy, thereby exposing a continuity of institutional gaps that are unlikely to be remedied without a fundamental reassessment of dependence on geopolitically exposed fossil‑fuel imports.

Published: April 23, 2026