The United States and Iran have reached a historic peace agreement to end the conflict in the Middle East. This deal will open the Strait of Hormuz for global trade, stabilising oil prices after months of disruption.
Background of the deal
Brokered largely by Pakistani and Qatari mediators, the agreement was finalised earlier this week and is scheduled to be formally signed on Friday, June 19, 2026, in Geneva, Switzerland. The conflict had triggered a massive global energy crisis following a two-month US naval blockade and the effective shutdown of critical shipping lanes.
When will petrol and diesel prices come down?
According to the RAC, wholesale fuel prices have already fallen sharply. As retailers adjust pricing, UK averages are projected to drop significantly over the next fortnight:
- Petrol: Expected to drop from current averages of around 156p down to 148p per litre.
- Diesel: Expected to fall from current averages of 177p down to under 160p per litre, a relief for diesel drivers who saw prices peak at 192p in mid-April.
The longer picture
While pump prices will drop over the next few weeks, they likely won't return to pre-war levels (around 132p for petrol and 141p for diesel) anytime soon. It will take several months for the global energy market to fully stabilise. Clearing naval mines from the Strait of Hormuz, repairing damaged infrastructure, and reassembling disrupted shipping fleets will take time. Shell and Morgan Stanley analysts estimate that only about half of the region's normal oil and gas exports will be restored by autumn. Nations globally will look to aggressively restock their depleted emergency fuel reserves over the summer, keeping a steady floor under oil prices.
Will this deal affect home energy prices?
While petrol prices respond to market shifts within days, home energy bills operate on a time delay. Because of how the UK's energy market is regulated, the peace deal will not stop your energy bills from rising this summer, but it will likely prevent a massive, painful spike this winter. On May 27, the energy regulator Ofgem already finalised the price cap for July 1 through September 30, 2026. Because that cap was calculated using the sky-high wholesale gas prices from March and April (the peak of the conflict), bills are still going up by 13% on July 1 – to £1,862 a year.
Ofgem will set the winter price cap (October to December) based on wholesale market data collected throughout June, July, and August. Before the peace deal, analysts like Cornwall Insight and major suppliers like EDF warned that a prolonged war would push winter bills past £2,000 a year, with some predicting further rises in October. Now that the deal has caused wholesale gas markets to calm down, energy experts project that the winter price cap will flatten out or even drop, completely erasing those catastrophic winter forecasts.
