Managing the economic consequences of the Iran war

Introduction

On 28 February the US, alongside Israel, launched a surprise attack on Iran, plunging the Middle East into chaos. The conflict involving attacks on energy infrastructure and shipping in the region – particularly in the crucial Strait of Hormuz – sent shockwaves across the global economy. The announcement of a temporary ceasefire, in the early hours of 8 April, has allowed a brief respite – but even if that lasts, the economic ripples will continue to be felt for months across the world. If hostilities resume, the impacts will be far greater. 

Although the prime minister has assured the nation that the government has a plan, his announcements at his Downing Street press conference before Easter were long on measures the government had decided on well before the war started, but short on how the government was responding to the emerging economic fallout. That lies in contrast with the reactions of other governments across the world. 

In this short paper we look at how the UK government should respond, drawing both on lessons from recent crises and from forthcoming Institute for Government research on policy making in a crisis.

This is not a repeat of 2022

Though there are echoes of the energy crisis that followed Russia’s invasion of Ukraine in 2022, the current situation is different in important ways. This crisis currently primarily surrounds the supply of oil and related products (though gas supplies have been affected too). That brings with it much wider impacts on global trade, disrupting the flow of crude oil, jet fuel and other goods like agricultural fertilizer and petrochemicals from the Middle East.

Some Asian countries are already facing shortages and their governments are responding by taking measures to reduce energy use. Others, including the UK, are so far seeing higher prices, but haven’t experienced immediate supply disruptions – though there could be a crunch coming on jet fuel. But the global economic impact of the crisis is dire: a proportion of the global supply of oil, gas and other important products has disappeared overnight. 

The crisis is far from over

Even if the ceasefire leads to a permanent cessation in hostilities, the damage already done to energy infrastructure in the region, and the difficulty in restoring supply chains after weeks of disruption, means that oil and gas supply will still be affected for some time. ⁹⁰ ‘Even the best-case scenario for energy markets is disastrous’, The Economist, 22 March 2026, retrieved 7 April 2026, https://www.economist.com/finance-and-economics/2026/03/22/even-the-best-case-scenario-for-energy-markets-is-disastrous  In short, the hit to supply chains across the globe will not end with Wednesday’s truce announcement. 

This raises serious questions: about the resilience of the UK economy to weather such shocks, about the government’s crisis response capabilities, and about its energy resilience, both in the near and longer term. So how should the UK government react, and what can it learn from previous crises as it designs its response? 

How badly affected is the UK?

Where does the UK get its energy from?

The UK is a net energy importer, making it vulnerable to global energy shocks. The UK gets a relatively small portion of its oil and gas from the Middle East: around 1% of its gas supplies in 2025 came from Qatar, the largest supplier to the UK in the region. ⁹³ DESNZ, ‘Iran, the Middle East and UK energy: factsheet’, 6 March 2026, https://www.gov.uk/government/news/iran-the-middle-east-and-uk-energy-factsheet  But it imports heavily from other regions – and has increasingly done so since the 2000s as domestic production of North Sea oil and gas declined. Most of the UK’s gas imports come from Norway via pipelines and as liquified natural gas (LNG) shipments from the US. 

As a condition of its membership of the International Energy Agency (IEA) the UK is required to hold oil stocks equivalent to 90 days of net imports. ⁹⁴ DESNZ, ‘Digest of UK Energy Statistics: petroleum, Chapter 3: Oil and Oil Products ’, 31 July 2025, https://www.gov.uk/government/statistics/petroleum-chapter-3-digest-of-united-kingdom-energy-statistics-dukes  But it has limited gas storage capacity, leaving it vulnerable to the risk of supply disruptions. 

How does the UK use energy?

The amount of gas used to generate electricity in the UK has declined since 2022, with demand slowly reducing and more renewable generation, particularly wind. But around 80% of households still use gas to heat their homes and gas still sets the price of electricity over 80% of the time. ¹⁰⁰ Evans S, ‘Q&A: Why does gas set the price of electricity – and is there an alternative?’, Carbon Brief, 13 March 2026, https://www.carbonbrief.org/qa-why-does-gas-set-the-price-of-electricity-and-is-there-an-alternative/  

This reliance on gas means that many households are particularly vulnerable to rising gas prices. UK household energy prices are controlled by the Ofgem price cap and had been falling since the summer of 2023 – and indeed fell again on 1 April when the new cap, set before the crisis, came in – but are still 14% above pre-2022 crisis levels in real terms. ¹⁰¹ Bolton P, ‘Gas and electricity prices during the 'energy crisis' and beyond’, House of Commons Library, 25 February 2026, https://researchbriefings.files.parliament.uk/documents/CBP-9714/CBP-9714.pdf ¹⁰² Levell P, Ridpath N and Upton B, ‘What does the war in the Middle East mean for energy prices, and how could the government respond?’, Institute for Fiscal Studies, 12 March 2026, https://ifs.org.uk/articles/what-does-war-middle-east-mean-energy-prices-and-how-could-government-respond  The price cap will next change at the start of July, when forecasts in March suggested it could rise by over £300. ¹⁰³ Hooker L, ‘Energy bills forecast to rise by £332 a year in July’, BBC, 20 March 2026, retrieved 7 April 2026, https://www.bbc.co.uk/news/articles/cede1nn8wp5o  

On top of this, many are still feeling the effects of that 2022 energy crisis: household energy debt doubled over the last three years, with Energy UK estimating around 2 million households were experiencing some form of energy debt in February 2026. ¹⁰⁴ ‘Energy UK raises alarm over £5.5 billion energy debt crisis’, EnergyUK, 26 February 2026, https://www.energy-uk.org.uk/news/energy-uk-raises-alarm-over-5-5-billion-energy-debt-crisis/#:~:text=26%20Feb%202026,to%20annual%20bills%20over%20ti….  

How does this affect the UK economy and public finances?

The UK economy relies on imported energy so is again very exposed to reduced global supplies of oil, gas and the resulting spikes in energy prices. While higher energy bills are the most direct impact of this crisis, it is also having broader effects on the global economy as the costs of manufacturing and transportation rise. Higher costs for businesses, and bills for households, will unavoidably harm the UK economy: the OECD has already revised down its expectations for growth in 2026 from 1.2% to 0.7%. ¹⁰⁶ ‘OECD Economic Outlook, interim report March 2026’, OECD, 26 March 2026, https://www.oecd.org/en/publications/2026/03/oecd-economic-outlook-interim-report-march-2026_254a8d56.html  The Bank of England was expected to cut interest rates this year; it now has to try to balance the twin challenges of rising inflation and a slowing economy.

The public finances will be affected by higher interest rates on new UK government debt as markets now anticipate relatively higher inflation and interest rates in future. And while it will receive extra tax revenues in the short term, from VAT on fuel and (down the line) on domestic energy, these may well be outweighed by upward pressures on public spending as higher inflation feeds through to higher welfare and pensions spending, and a weaker economy hits tax receipts and drives higher benefits spending. Any additional government policy response might help to cushion the impacts of the crisis, but would not come cheap – and would be an additional cost against the backdrop of fragile public finances.

How has the UK government responded so far?

The government has so far done well to resist calls for a repeat of the universal energy support packages offered in the immediate aftermath of the Ukraine war. In 2022, the government stepped in to protect households from the energy shock with two packages. The first, under Boris Johnson, consisted of a discount on bills for all households and council tax rebates for people in lower value (Band D or below) properties. That was followed up in the autumn by Liz Truss’s Energy Price Guarantee, a 39% energy price subsidy at that time, and the Energy Bills Support Scheme that gave £400 universal transfers. 

Together these cost £35 billion – more than 1% of GDP. ¹¹⁷ Levell P, O’Connell M, Smith K, ‘Urgent need to learn lessons from expensive energy support packages: better design could have saved £4.5 billion’, Institute for Fiscal Studies, 31 January 2025, https://ifs.org.uk/news/urgent-need-learn-lessons-expensive-energy-support-packages-better-design-could-have-saved  

Rachel Reeves has said that the UK is not in a position to offer such support again. She claimed those interventions disproportionately benefited the better off and has promised to shield the poorest households from rising energy bills. ¹¹⁸ Crew J, ‘Reeves plans energy bill help for those 'who need it most'’, BBC, 24 March 2026, retrieved 7 April 2026, https://www.bbc.co.uk/news/articles/cr516nmer5eo  So far the only support unveiled has been a package to help households dependent on heating oil. ¹¹⁹ HM Treasury, Northern Ireland Office, ‘Over £50 million to help families struggling with soaring heating oil costs’, 16 March 2026, https://www.gov.uk/government/news/over-50-million-to-help-families-struggling-with-soaring-heating-oil-costs  The government has also resisted pressure to row back on the planned unwinding of Rishi Sunak’s “temporary” 5p cut in fuel duty introduced in spring 2022, though it has said it will keep the policy under review.

On the energy side, the government has announced plans to bring forward the next renewable energy auctions (in which it offers long-term contracts for the construction of new renewable generation); accelerate the next round of funding for home upgrades for low-income homes through the Warm Homes Plan; allow ‘plug-in solar’ panels to be bought in the UK for the first time; and reform nuclear power regulations to speed up the building of nuclear power stations. ¹²⁰ DESNZ, ‘Government to go "further and faster" in becoming energy secure’, 15 March 2026, https://www.gov.uk/government/news/government-to-go-further-and-faster-in-becoming-energy-secure  It has also announced investment in a prototype fusion power plant, the first in the world. ¹²¹ DESNZ and UK Atomic Energy Authority, ‘Britain to lead fusion energy race to deliver energy security’, 16 March 2026, https://www.gov.uk/government/news/britain-to-lead-fusion-energy-race-to-deliver-energy-security  

How have other governments responded?

Some governments have gone further. The Australian government has launched a National Fuel Security Plan, ¹²² Australian Government, ‘National Fuel Security Plan’, 30 March 2026, https://www.pmc.gov.au/resources/national-fuel-security-plan  which identifies four levels of response based on the severity of the crisis and how the public and each layer of government should respond. The European commission has asked member countries to follow IEA advice including to encourage working from home where possible, reducing speed limits and encouraging the use of public transport, ¹²³ Fernyhough J, Giordano E, Munster B & Makuch B, ‘Top Brussels official urges Europeans to work from home and drive less’, Politico, 31 March 2026, retrieved 1 April 2026, https://www.politico.eu/article/europeans-urged-to-work-from-home-and-drive-less-as-eu-warns-of-long-crisis/  to prepare for ‘prolonged disruption'. ¹²⁴ Munster B, ‘Brussels says Europeans should consider traveling less to avoid energy shortages‘, Politico, 30 March 2026, retrieved 1 April 2026, https://www.politico.eu/article/brussels-urges-europeans-to-travel-less-to-avoid-spiraling-energy-costs/  Other governments have publicly campaigned for consumers to voluntarily cut energy demand alongside energy saving measures in the public sector. ¹²⁵ IEA, ‘2026 Energy Crisis Policy Response Tracker’, IEA, (no date) retrieved 7 April 2026, https://www.iea.org/data-and-statistics/data-tools/2026-energy-crisis-policy-response-tracker

However, a large proportion of these governments have resorted immediately to tax cuts of the sort advocated by opposition parties in the UK. Even if some are less constrained by their public finances than the UK, this sort of measure prevents ‘price signals’ acting to rebalance demand and supply, and risks creating the need for more draconian measures like rationing. In global terms, this concentrates the impact of shortages on poorer countries who cannot afford to pay higher prices. ¹²⁶ Fleming S, Shaw A, Cotterill J, Borrett A, & Lakshmi A A, ‘The global wave of energy rationing’, Financial Times, 2 April 2026, retrieved 7 April 2026, https://www.ft.com/content/a9f56d68-4cdd-47f7-873e-ca6ac0ea8962?syn-25a6b1a6=1  

Even if the conflict ends soon, disruption is expected to continue: repairing infrastructure, getting shipping back up to speed and restoring supply chains will not happen overnight. So how can the UK government respond, and what can it learn from previous crises as it does this?

What should the government do now?

With the conflict in the Middle East entering its second month and showing little sign of reaching a conclusion, the UK government needs to show that it has a plan to manage the consequences. That needs to work on three distinct time horizons: the immediate response; developing medium-term options; and ensuring the UK’s longer-term resilience. Coordination is necessary to ensure that those three states of responses reinforce rather than undermine each other – and they all need to take account of emerging intelligence on the developing situation internationally and domestically. 

No.10 should establish clear coordinating machinery inside government

The prime minister has been commended for his stance on the UK’s limited military involvement in the conflict (albeit in some cases belatedly), but at home it is far from clear who is in charge of the government response, or how it is being coordinated. The government has called COBR meetings and ‘summits’ with affected businesses, but a crisis on this scale requires continuing coordination at the highest levels. 

As prime minister, Gordon Brown established the National Economic Council as a prime coordinating forum for action on the 2008 financial crisis. What was particularly useful at the time was the underpinning and high-level NEC (O) committee of officials. The secretariat compromised officials from Treasury and the Cabinet Office. This government could apply a similar model now – bringing in the Treasury but also the business, transport and energy departments. 

Local and devolved governments will also play a part: the recent heating oil package will be delivered by them, so it would make sense to have a forum that can be activated to engage these administrations in the design of any response too. 

The prime minister and cabinet secretary should also stand up the necessary coordinating mechanisms within the centre, supported by a cross-government secretariat. They should also create cross-cutting teams to develop options for ministers, specifically designed for the immediate, near and longer term, as set out below.

Immediate response 

The government needs to be ready to act, responsibly, where acute need rises immediately. It has already set out support for low-income households using oil for heating as kerosene prices have risen faster than other fuels and households using oil are not covered by the Ofgem price cap. The scale of the package may need to be revisited as the crisis develops; the government will need to monitor changing prices and assess whether further help is required or not. ¹³³ Fee P, Halpin H & Bedwell M, ‘£17m support for heating oil costs in NI is 'not enough'’, BBC, 16 March 2026, retrieved 7 April 2026, https://www.bbc.co.uk/news/articles/c80j87vx5k8o  

The government will also need to think about its approach to support for businesses. There is no price cap for non-domestic energy users, who are often on fixed contracts of 1–3 years, so businesses with energy deals ending soon could see a sudden rise in energy costs. 

Energy-intensive industries will come under particular pressure. Industries like steelmaking and chemicals have been declining in the UK, though the government stepped in to save British Steel’s Scunthorpe site in early 2025 and has now agreed to invest £100m to reopen a CO2 plant closed in September. ¹³⁴ Jordan D, ‘UK CO2 plant to reopen in Iran war contingency plan’, BBC, 26 March 2026, retrieved 7 April 2026, https://www.bbc.co.uk/news/articles/cew7xrj4497o  It may soon need to make wider decisions about what sites and sectors it will support through higher energy costs – and which it will not. 

Similarly, the Department for Business and Trade needs to keep strategic supply chains under detailed scrutiny. The government should have a plan in place so decisions about which sectors and sites are critical to the national interest can be taken strategically. 

The impacts will not be confined to intensive users, however – other precarious sectors like hospitality and retail may also seek help. Here too the government should be clear on where it is willing and able to step in, and where it is not, and what kind of support it should provide in what form. 

That the UK is heading into summer will ease the immediate affects, but the government should think about what it says to people now about reducing their exposure later in the year. The Ofgem price cap falling at the start of April could make this a harder sell. But the government can start promoting energy efficiency and make the case that as bills smooth over the year, there will be benefits from using energy more prudently now. 

One option – largely ignored in 2022 – is public campaigns about easy demand reduction measures that households can take immediately, like draught-proofing and ensuring optimal boiler settings. ¹³⁵ Cretu C, King K, Gabriel M, Palmer J & Terry N, ‘Free and low-cost energy-saving actions to bring down bills, improve energy security and help the planet’, Nesta, 2022, https://www.nesta.org.uk/report/free-and-low-cost-energy-saving-actions-to-bring-down-bills-improve-energy-security-and-help-the-planet/  These should also extend to private transport, where using fuel more efficiently and reducing unnecessary journeys can make a minor contribution to pressure on oil prices and shield people against the immediate price shock. 

Demand reduction helps the government’s longer-term goals while cutting bills and reducing UK fossil fuel use – getting this information to households now will help on all these fronts. The public already appears to be reacting with increased interest in both electric vehicles ¹³⁶ Holder M, ‘UK electric car sales surge to 'best ever' month in March’, BusinessGreen, 7 April 2026, retrieved 7 April 2026, https://www.businessgreen.com/news/4527980/uk-electric-car-sales-surge-best-march  and alternatives to conventional gas home heating. The energy company Octopus has reported a big rise in the number of people contacting them about getting solar panels since this crisis started. ¹³⁷ Byers D, ‘British homeowners rush to install solar panels amid Iran conflict’, The Times, 23 March 2026, retrieved 7 April 2026, https://www.thetimes.com/life-style/property-home/article/are-solar-panels-worth-it-iran-war-energy-prices-7djlb5mnh   

The government has also announced accelerated funding for the Warm Homes Plan, which assists with upgrades to lower-income households. This is too good an opportunity for the government to miss to reinforce the advantages of switching. 

The situation is unpredictable and the government should also be planning now how it will manage the potential for shortages, whether for fuel or other critical products. DESNZ already has plans for how it would manage fuel shortages, including protecting supply for critical services and limiting individual purchases; ¹³⁸ DESNZ and BEIS, ‘Summary of response tools in the National Emergency Plan for Fuel’, updated 16 April 2024, https://www.gov.uk/government/publications/energy-emergency-plans-priority-fuel-allocation/summary-of-response-tools-in-the-national-emergency-plan-f…  the government should ensure that it has plans across all key sectors ready to activate if the need arises. 

To do this, it needs to build early warning mechanisms with real time data, drawing on potentially unconventional sources as it did both in response to the financial crisis and in the pandemic to make sure that it can intervene before shortages emerge or supply chains break down to manage priority need. 

Finally, if it is not doing so already, the government should also start developing worst case scenarios and planning how it would respond. That work should include the potential wider effects of a global economic slowdown or recession and the potential impact on public services of higher energy prices. 

In 2022, the government effectively imposed a real terms squeeze on public services by not compensating for higher energy bills. It needs to understand the consequences if it does that again and how capable individual services are of managing that squeeze within existing budgets. 

Medium-term

The April energy price cap and warmer temperatures have bought the government time to think about what its options are if domestic energy prices are still high in the winter when households use more energy. It must use this time to work out how to get the data it needs to design a targeted scheme that ensures people who will really struggle get the help they need, while ensuring that energy waste is disincentivised.

At the moment the government is correctly resisting demands for wider support for households, but it should be considering what kind of support it might put in place if prices have risen far enough that it feels this is necessary by the autumn. In 2022 the then government was unable to target support because of gaps in the data: some progress has been made but not enough. The government announced a ‘kickstarter’ to work on this problem earlier this year, but it should now be looking at how far it can accelerate that work to enable a much more targeted scheme if further support becomes necessary. ¹⁵⁴ DSIT, ‘Targeted energy bill support and simpler access to legal guidance among plans to put data to work to improve lives’, press release, 26 January 2026, https://www.gov.uk/government/news/targeted-energy-bill-support-and-simpler-access-to-legal-guidance-among-plans-to-put-data-to-work-to-improve-lives ¹⁵⁵ Energy UK, ‘A better approach to energy bill support’, Energy UK, 17 March 2026, https://www.energy-uk.org.uk/publications/a-better-approach-to-energy-bill-support/  

And it should think about how to provide short- to medium-term support to best fit with its longer-term objectives. Moving policy costs off electricity bills and onto general taxation, for example, would reduce energy bills for all households while improving incentives for households to electrify. ¹⁵⁶ Energy UK, ‘A better approach to energy bill support’, Energy UK, 17 March 2026, https://www.energy-uk.org.uk/publications/a-better-approach-to-energy-bill-support/ ¹⁵⁷ Clegg A, Curtice R, Leather Z, Marshall J, Smith J and Try L, ‘Power Struggle’, Resolution Foundation, 18 March 2026, https://www.resolutionfoundation.org/publications/power-struggle/  Similarly, if the data is available the type of scheme Germany used during the 2022 crisis where support was provided based on a percentage of historic energy use, targeted at those in most need, would provide support without removing the incentive to reduce demand. 

The government should also start to think how long it could realistically provide support for in worse-case scenarios, when support will end and how they can manage expectations about this from the start.

Longer term

Two energy crises within half a decade show the need to increase the UK’s energy resilience. The government needs to review its plans to ensure that the UK can withstand disruption to all its sources of energy and can cope when its critical supply chains are threatened. That needs to cover both sources of supply, adequate storage and electrification of heating and transport. ¹⁵⁸ Butler N, ‘How to restore Britain’s energy security’, blog, 23 March 2026, retrieved 7 April 2026, https://nbutler.substack.com/p/how-to-restore-britains-energy-security  

The government’s position that the most effective long-term policy response to this kind of fossil fuel shock is decarbonisation and electrification is well-evidenced. Analysis suggests it will not only reduce the UK’s reliance on fossil fuel imports but will also cut bills and reduce demand, as technologies like heat pumps and electric vehicles are much more efficient than the equivalent fossil fuel technologies. 

The Climate Change Committee’s seventh carbon budget analysis, for example, estimated that if gas costs spiked to 2022 levels in 2040 the average dual-fuel energy bill would increase by 59% if the current energy system continued but only 4% under their central net zero trajectory. ¹⁵⁹ Climate Change Committee, ‘The Seventh Carbon Budget’, 26 February 2025, https://www.theccc.org.uk/publication/the-seventh-carbon-budget/   ¹⁶⁰ Relative to central gas cost assumptions.

The government should maintain its focus on the incentives to electrify for both households and businesses. It should explore the scope for spending some of the money that could go on price support on subsidies or other incentives to encourage switching instead. 

This crisis has highlighted threats to the UK’s energy resilience. The UK’s ‘renewables plus gas’ approach has enabled rapid decarbonisation of the power sector, one of its key aims. But, with the UK’s energy pricing system – where the marginal power generated sets the price (most often gas) – and the slow electrification of transport and home heating, it has also left the UK more exposed to this kind of fossil fuel shock than other major economies, according to OECD analysis. ¹⁶¹ ‘OECD Economic Outlook, interim report March 2026’, OECD, 26 March 2026, https://www.oecd.org/en/publications/2026/03/oecd-economic-outlook-interim-report-march-2026_254a8d56.html  

When it comes to electricity generation, the seventh carbon budget points to increased renewable and nuclear generation, bioenergy, hydrogen-fired turbines, gas with CCS, and various kinds of grid-level energy storage. ¹⁶² Climate Change Committee, ‘The Seventh Carbon Budget’, 26 February 2025, https://www.theccc.org.uk/publication/the-seventh-carbon-budget/  The government has already announced major reforms to nuclear regulation to make it cheaper and quicker to build nuclear power plants in the UK. ¹⁶³ DESNZ & MOD, ‘Overhaul of nuclear system to speed up building and cut costs’, press release, 13 March 2026, https://www.gov.uk/government/news/overhaul-of-nuclear-system-to-speed-up-building-and-cut-costs  It should now be thinking about whether there are any other areas of the transition that could be similarly accelerated and how to ensure diverse sources of dispatchable low-carbon generation to build resilience in the future energy network. ¹⁶⁴ Poudineh R, ‘Fossil fuel shocks and European electricity prices since the 1970s: what can we learn?’, Oxford Institute for Energy Studies, March 2026, https://www.oxfordenergy.org/publications/fossil-fuel-shocks-and-european-electricity-prices-since-the-1970s-what-can-we-learn/   

This crisis has also highlighted the UK’s limited stores of gas and reliance on timely imports. The UK has significantly less gas storage capacity than France or Germany, for example. ¹⁶⁵ Energy UK, ‘The role of gas storage in ensuring energy security’, Energy UK, retrieved 7 April 2026, https://www.energy-uk.org.uk/fuelling-the-future/the-role-of-gas-storage-in-ensuring-energy-security/  Historically this was a minor issue because of the UK’s significant domestic production, but this is no longer the case and domestic production will likely continue to decline. The government should work out what its risk appetite is around gas supplies, how much gas storage is needed to hit that, and what it could do to increase storage capacity to required levels.

Even if the UK hits net zero by 2050, natural gas will remain a part of the energy system, albeit a diminishing one. The government has already set out plans to allow new extraction at or adjacent to existing North Sea oil and gas sites but is being pushed to issue further new exploration licenses. It has been concerned that allowing more North Sea oil and gas exploration would undermine its climate leadership. Some have argued ¹⁶⁶ Ambrose J, ‘Green energy boss backs more North Sea oil and gas production from existing sites’, The Guardian, 24 March 2026, retrieved 7 April 2026, https://www.theguardian.com/environment/2026/mar/24/green-energy-boss-backs-more-north-sea-oil-and-gas-production  that North Sea oil and gas production is better for both energy security and emissions: the Climate Change Committee, for example, said in 2022 that there might be emissions advantages to UK production replacing imports, but that additional oil would support a larger global market and as such the evidence was not clear cut. ¹⁶⁷ Climate Change Committee, ‘Letter: Climate Compatibility of New Oil and Gas Fields’, 24 February 2022, https://www.theccc.org.uk/publication/letter-climate-compatibility-of-new-oil-and-gas-fields/?utm_source=copilot.com   

But the North Sea is a mature field with remaining reserves generally comparatively expensive to access. Any new exploration would not be instantaneous and would do nothing to lower bills – though it could, depending on how favourable the tax regime had to be to induce companies to produce, add to tax receipts and reduce UK import dependency. ¹⁶⁸ Offshore Energies UK, ‘Business Outlook Report 2026’, March 2026, https://oeuk.org.uk/product/business-outlook-report-2026/  If the government decides it wants to take this option, it needs to be clear about whether its objectives are production or future tax receipts and how this approach fits with net zero plans and then design the tax and regulatory regime accordingly.

Of course, these plans for securing long-term energy security need also to be developed in the context of the need to invest more in the UK’s national security more generally. The government has already set out an unfunded ambition to increase defence spending to 3.5% of GDP by 2035, up from the 3% envisaged in last year’s spending review. It also needs to look beyond energy at other critical supply chains. 

The plans must be coherent and guided by clear operating principles

The scope of the crisis – and the span of initiatives, measures and departments listed above – shows just how wide-spread the government’s response plans must be. To ensure that people working on the crisis response are heading in the same direction, the government needs to translate its priorities and red lines into some clear operating principles. 

It is for the government to set those principles, but they could include: 

• Do not shield non-vulnerable households from price signals – this is a supply side shock and price signals like rising bills can work to show that there has been a change in supply: this is a good way to get people who can afford to to change their behaviour. This may just mean cutting consumption, but it could also lead some to adopt electric vehicles or heat pumps to manage their own risk.
• Concentrate support on those who need it – this is important both for fiscal reasons but also to allow price signals to work as set out above. The government should not pretend that the shock does not exist. 
• New measures should where possible boost longer-term resilience and other objectives. One of the notable take-outs from the price support in 2022 was that the only long-term legacy was in the national debt. This time should be different.
• Be prepared to intervene quickly when unexpected problems emerge: the government should look to act in advance of problems materialising and use its coordinating machinery to manage any shortages in a way that avoids panic. 
• Monitor measures – and their impacts – introduced in other countries, both to see what is working and what is not, but also because it is likely that there will be pressure to replicate successful schemes. 
• Develop and prepare for worse case scenarios – government should think through the wider ramifications of the more severe impacts, such as those already emerging in Asia. 

What lessons should the government take from previous crises?

Forthcoming Institute for Government research into policy making during previous crises – from the financial crisis to the pandemic to the Ukraine war – highlights some lessons that the government should draw on as it responds.  

1. Ensure everyone is clear about aims and red lines

Clarity about immediate goals is one of the most important ingredients for an effective short-term crisis response. The government’s Amber Book emphasises ‘direction’ as a core principle for effective crisis management. ¹⁷³ Cabinet Office, ‘The Amber Book: Managing Crisis in Central Government’, updated 28 April 2025, https://www.gov.uk/government/publications/the-central-government-s-concept-of-operations/the-amber-book-managing-crisis-in-central-government-html  Officials who worked on financial recovery measures, like the furlough scheme during the pandemic, described how ministers clearly outlined what they were looking to achieve and the trade-offs they were willing to accept when commissioning advice. This enabled officials to get a scheme up and running quickly that achieved the government’s core aims. ¹⁷⁴ Pope T, Dalton G & Tetlow G, ‘The Coronavirus Job Retention Scheme’, Institute for Government, October 2020, https://www.instituteforgovernment.org.uk/sites/default/files/publications/coronavirus-job-retention-scheme_0.pdf  IfG work on the role of ministers in crises has highlighted that ministers are particularly well placed to establish the bounds of what is politically acceptable. ¹⁷⁵ Savur S, McAlary P, Durrant T, ‘Ministerial leadership during crises’. Institute for Government, June 2025, https://www.instituteforgovernment.org.uk/publication/ministerial-leadership-crises  

The prime minister and the relevant cabinet ministers need to be clear on what their priorities are, what their red lines are, and where they are willing to accept trade-offs, and communicate this clearly to officials designing the policy response.

2. Separate thinking about longer-term issues from immediate crisis response

The pressures of crisis response can often crowd out thinking about anything beyond the most immediate problems. This is understandable, but the government should make sure some individuals and teams are focused specifically on longer-term plans and protected from being drawn into immediate crisis response. 

The focus during the previous energy crisis in 2022 was on short-term support for households: while this was clearly vital in the aftermath of Russia’s invasion and disruption to gas markets, the UK failed to push ahead on longer-term improvements to energy efficiency, electrification or data availability. The result is that the country is not in a noticeably better position now to face the latest energy shock than it was then, despite the vast sums spent. 

The previous government recognised the need to ensure consideration of longer-term impacts is protected when it reformed Cabinet Office response mechanisms after the pandemic, creating a new Resilience Directorate that was separate from the crisis response function. But even with a dedicated team, longer-term questions about increasing resilience can struggle for traction (and investment) in the face of repeated crises. 

It is also critical that emerging issues that cannot be addressed in the initial crisis response are captured and fed back to the relevant policy teams so that they are not lost and can be addressed as work transitions back to business-as-usual.

3. Think carefully about the available evidence

Data gaps were, and are, a major constraint on government’s ability to target energy price support. Government failed to address this sufficiently between crises and so now faces many of the same data challenges as in 2022 – it is for example unable to combine data on household income and energy use to target those most in need. It should be trying to improve data as quickly as possible now. But doing so at speed will inevitably introduce some risk. This is true in most crises, which can provide the impetus to develop new sources of data and evidence but can also limit time to interrogate data and evidence thoroughly. 

The government needs to carefully consider what or who might be missing from the data and evidence available, what its biases might be and whether the impact on different groups, particularly those less well represented among decision makers, has been properly considered. 

It is highly likely that none of the options will be perfect – but the government needs to understand where the gaps are in each approach. It can be useful to consider what failures might be attributed to how policies were designed and implemented before the policy design is complete to think about whether any of those risks could be addressed.

4. Open the policy process, particularly to operational and delivery expertise

Our research suggests that one of the features of successful policy response in crises has often been openness and integrating operational expertise. During Covid, for example, the furlough scheme was designed by the Treasury in tandem with HMRC and implementation was integral to the policy design. In contrast, there was limited engagement with the NHS or diagnostic industry before the health secretary set an ambitious target of 100,000 Covid tests per day, meaning that testing efforts were less effective in the early stages of the pandemic. ¹⁷⁶ Nickson S, Thomas A & Mullens-Burgess E, ‘Decision making in a crisis’ Institute for Government, September 2020, https://www.instituteforgovernment.org.uk/sites/default/files/publications/decision-making-crisis.pdf  

Government will need to consult meaningfully with industry and work with delivery partners to ensure that any response measures, to the Iran war or future crises, reinforce rather than undermine their longer-term aims for the energy system.

Conclusion

The outbreak of war in the Middle East has thrown governments around the globe into crisis response mode. For its part, the UK government deserves credit for acting where there was an immediate need while refusing to be bounced into early action on wider support for domestic bills, or the planned fuel duty hike in September. Indeed, the decision of the opposition to major initially on a 1p hike in fuel duty in six months time, which will have minimal impact on household costs underlines the fundamental unseriousness of its approach to the current crisis so far. They have compounded that by suggesting that the right approach is to dull the critical price signals by cutting VAT on domestic fuel and power for everyone. 

But the government also seems determined to signal ‘business as usual’ rather than suggest the need for any adjustment. While seeking to reassure, the prime minister’s 1 April press conference centred on the cut in the energy price cap (which will almost certainly be undone, and then some, in July) and the rises in the national living wage, alongside setting out plans for meetings to pursue de-escalation. He batted away questions on the need to change behaviour. 

There is a balance to be struck between panic and planning – but this risks looking complacent. The government needs to convince the public that it is closely monitoring developments and has plans to deal quickly with potential blockages or problems if they emerge, and that it has the right decision making processes in place to do that. 

It failed to show that it was gripping this crisis. Instead it has left a vacuum, which has been filled by an auction for expensive action by opposition parties and reports of internal cabinet divisions over the future of the North Sea. None of this instils confidence in government management of the crisis. 

The government should start communicating with the public about sensible ways they can help reduce the impact of price hikes and contribute to reducing overall energy demand when there has been a global curtailment of supply. It needs to remove the expectation that government should – or indeed can – completely insulate consumers and businesses from the impact of a shock of this magnitude. But it needs to do that in a way that avoids panic (or panic measures) that could inadvertently make a bad crisis much, much worse. 

If the ceasefire holds, and this proves to be a temporary crisis (albeit with a long tail) then the government may not need to go much further than its limited response to date. But it has been slow off the mark – and needs to learn the lessons on how to stand up machinery more quickly for future crisis management in an increasingly unstable world.