Escalating conflict involving Iran has once again sent shockwaves through UK and global energy markets, with oil and gas prices reacting quickly to fears around supply disruption. Iran sits at the centre of one of the world’s most strategically important energy corridors, and any threat to production or shipping routes in the Middle East tends to push energy prices higher, even if the UK’s physical supply has not yet been interrupted.
How the Iran war impacts UK businesses
The UK imports nearly half (43.8%) of its net energy, with the transport sector being the biggest consumer of oil annually at over 50 million tonnes. And while domestic use is the second-largest sector for energy consumption, commercial and industrial use still accounts for around 20 million tonnes of oil use per year.
Because of this reliance, when volatility in the market is felt, changes happen almost immediately. Oil prices influence not only fuel at the pump, but also the cost of transporting goods, heating commercial premises and powering energy‑intensive industries. Even short‑term instability can have knock‑on effects across supply chains, as businesses and suppliers factor increased uncertainty into pricing and contracts.
What can UK businesses do right now to manage rising energy costs
Tracy Lake, one of our commercial partners, specialising in energy and utilities, has shared her thoughts on what businesses in the UK can do in the short-term and long-term to keep their energy bills from rising excessively.
“Periods of geopolitical instability always expose just how vulnerable many businesses are to sudden energy price shocks.
“In the short term, organisations should be looking closely at their existing contracts to understand whether increased fuel and energy costs can be shared or passed on, particularly in energy‑intensive sectors such as transport, logistics, manufacturing and food production. Margins can be squeezed very quickly if that risk hasn’t been addressed upfront.
“We’re also seeing questions about whether disruption to fuel supplies or shipping routes could trigger force majeure or similar clauses. In reality, those arguments are often highly fact‑specific and more difficult to rely on than businesses expect, so taking early legal advice is crucial before making decisions that could affect customer relationships.
“Businesses must think strategically about their energy arrangements early on and revisit plans regularly, rather than treating them as a background operational cost. Businesses that are exposed to volatile pricing risk greater fluctuation in margins, uncertainty in cash flow, and strain in contractual relationships.
Specialising in sustainability and resilience in manufacturing and supply chains, our commercial partner, Mark O’Halloran, added:
“Geopolitical shocks like this expose hidden inefficiencies. Businesses that rely on linear ‘take‑make‑waste’ models are far more exposed to sudden price volatility because they’re paying repeatedly for virgin materials, wasted energy and avoidable losses across their supply chains.
“Developing more circular products (i.e., designing for durability, repair, remanufacture and resource recovery) is now essential to cost‑control and resilience strategy. The less material and energy you lose as waste, the less exposed you are to external shocks you can’t control.
“Manufacturers that build in recycling capabilities and power themselves with greener energy can stabilise input costs far more effectively than competitors who remain dependent on fossil fuel markets. That directly translates into stronger margins and better commercial certainty.”
How UK businesses can future-proof their energy consumption and costs
How realistic is it for businesses to manage their energy consumption with renewable options?
Tracy says, “There are several options for businesses to consider. One option is longer‑term supply agreements, as they can reduce the impact of short-term spikes and make cost forecasting more reliable. Another increasingly popular route is renewable‑backed tariffs, allowing a reduced reliance on imported energy and offering a level of cost stability over time.
“For businesses with land or large buildings, on‑site generation such as solar panels, wind turbines, or partnerships with specialist developers to install renewable infrastructure on your land can provide longer-term certainty. These projects require forward planning, but businesses that assess any of these options early are far better placed to absorb future shocks.
Mark continues, “Energy efficiency, on‑site generation and renewable‑backed supply aren’t fringe options anymore. Combined with circular production models, they allow businesses to decouple growth from energy and resource consumption which is increasingly where competitive advantage is being created.”
“Circular design, reclaiming resources through recycling and greener energy all help businesses take back control over costs that were previously treated as unavoidable. In an increasingly volatile global market, that control is becoming a strategic differentiator not just a nice‑to‑have.”
While the situation involving Iran remains uncertain, its impact on global energy markets and UK oil and energy prices is already being felt. Businesses that review contracts early, seek expert advice, and adopt longer‑term energy strategies will be better placed to manage volatility and protect margins in an increasingly uncertain global landscape.
Navigating energy volatility requires early, strategic legal input. Knights commercial experts, including Tracy Lake and Mark O’Halloran, advise businesses on managing energy risk, protecting contracts and building more resilient supply chains. Businesses facing rising costs or uncertainty are encouraged to get in touch with the team to discuss practical, commercially-focused solutions.
Explore our commercial services