What Middle East tensions mean for hospitality energy bills

Kitchens run long hours, rooms always need heating or cooling, and even small price shifts affect the bottom line. So, when geopolitical tensions rise far away, it’s worth understanding why that still affects a hotel in Manchester or a restaurant group in Bristol.

The UK doesn’t import Iranian oil or gas directly, but that doesn’t offer as much protection as it might seem. UK wholesale energy prices are tied to worldwide indices, not bilateral trade agreements. Roughly 20% of the world’s oil and LNG exports pass through the Strait of Hormuz. When security concerns in that corridor rise, tanker traffic slows, insurance premiums spike, and traders bid prices up in anticipation of a tighter supply.

There’s also a knock-on effect that catches many businesses off guard: in the UK, gas-fired power stations frequently set the marginal price of electricity. That means rising gas prices push up electricity costs, too, even for businesses that don’t use gas directly.

For hospitality operators running on tight margins, this double exposure to both gas and electricity matters. For example, if wholesale gas prices rise by 10%, a mid-sized hotel could see monthly energy costs increase by £500 or more, depending on consumption. Even slight price upticks quickly add up, which is why it pays to stay aware of these risks.

Businesses on fixed-rate contracts are protected until their renewal. When contracts come up for renegotiation during a period of sustained wholesale volatility, suppliers price in the elevated risk. Quote validity windows shorten. Premiums increase. Businesses that leave renewal conversations until the last minute find they have fewer options and less time to consider them.

If your energy contract is due to expire within the next six to twelve months, begin reviewing and comparing renewal offers early. Contact your current and potential suppliers to discuss contract lengths, rates, and any further costs. Doing this now gives you more time to negotiate and make informed decisions, instead of being forced into a hasty choice with limited options.

The good news is that energy consumption, unlike global commodity prices, is something operators can influence directly.

Simple operational measures such as LED lighting upgrades, reviewing HVAC scheduling, and monitoring usage with smart meters can all reduce exposure to wholesale price swings. Even incremental reductions in consumption compound meaningfully across a full year of trading.

For those thinking mid- to long-term, on-site renewable generation, technologies like solar panels, and voltage optimisation can reduce reliance on grid electricity by up to 30-40% and bring a degree of price predictability that wholesale markets simply can’t offer. Power Purchase Agreements (PPAs) are another route to securing electricity at fixed rates over 25 year periods.

In a market where external events can shift prices rapidly, reducing your consumption and diversifying your energy sources are both sensible steps, regardless of what happens next in the Middle East.

Hospitality businesses can’t control global energy markets. But understanding what drives price movements, reviewing contract positions early, and taking steps to reduce consumption are all within reach. In an industry where margins are already under pressure, that awareness can make a meaningful difference.

Green Shield Group work with hospitality businesses on energy procurement, efficiency, and renewable solutions. If you’d like to explore what the current market means for your contracts, you can get in touch at [email protected].