Ministers are weighing up the idea of targeted support to help the poorest Britons with the cost of living if war in Iran keeps energy prices high.

The Government is putting increasing pressure on fuel retailers not to ramp up their prices as the conflict continues to rage but is holding off on intervening directly in markets, with no decision expected for several weeks.

The details and scale of any cost-of-living support will depend on whether and for how long global oil and gas prices remain well above their pre-war level.

New FeatureIn ShortQuick Stories. Same trusted journalism.

But two of the ideas currently attracting the most favour within Westminster are a freeze to fuel duty, which would cancel the planned 5p-per-litre rise due to start coming in this year, and a targeted scheme directed at those who will struggle most with higher costs.

Cornwall Insight, an energy consultancy with a strong record of forecasting the price cap for domestic gas and electricity, is predicting an 11 per cent rise in bills from July based on current global prices.

Its latest modelling suggests that the price cap, which is announced in mid-May and will apply between July and September, will rise from an average of £1,641 a year to £1,826.70 for those on a dual fuel tariff.

The cost could be significantly higher if fighting in the Middle East continues and sends wholesale prices for natural gas and oil higher than they are now for a sustained period.

Petrol prices have already increased by 8p a litre, with diesel going up twice as much, since the start of the war. The Treasury is actively considering the idea of scrapping a planned hike to fuel duty, which is due to start increasing from September to reverse a 5p “temporary” cut introduced in 2022, according to Government sources.

Any U-turn on the scheduled increase would probably need to be confirmed before MPs begin their summer recess in mid-July, so that Parliament can vote on the freeze.

Along with action on fuel duty, there is growing pressure for the Government to ensure that any help with energy bills in the event of sustained price increases is targeted at those who need it most – unlike the blanket subsidy introduced after the start of the Ukraine war, which cost tens of billions of pounds with much of the benefit going to households which were not struggling financially.

Rachel Reeves said this week: “We are working on different ways to protect people, including more targeted support.” One Labour MP told The i Paper that help should be “broadly targeted at low- and middle-income households, and energy-intensive businesses”.

The influential Institute for Fiscal Studies said: “More targeted cash payments, that do not distort energy prices, would help the government deliver support where it is needed in a more cost-effective manner.” Paying cash rather than subsidising bills would be cheaper, the think-tank said. Other leading researchers are expected to make similar arguments in the weeks ahead as ministers consider their options.

Trade unions are also pushing for action. Paul Nowak, head of the Trades Union Congress, said: “The Government must do everything it can to shield hard pressed households and firms from Trumpflation.” He urged the Bank of England to continue cutting interest rates in order to ease living costs – although the Bank is expected to keep rates on hold at its next meeting on Thursday.

Ministers have been meeting fuel retailers in Downing Street to warn them against “price gouging”, raising the prices they charge consumers by more than the increase in their own costs. Although ministers’ threats sparked a public row when the Petrol Retailers Association briefly promised to boycott the event because of the Government’s “inflammatory language”.

There is also pressure to protect the up to 2 million households which rely on heating oil, with some people reporting their bills have already doubled and orders of fuel have been cancelled. Heating oil is not covered by the energy price cap.

Ryan Sweet of Oxford Economics warned that the economy is more fragile now than it was during the last energy shock in 2022. He said: “The eurozone economy and UK are much more vulnerable to these supply shocks today… The excess saving that was developed during the pandemic washed away. The labour markets aren’t as tight as they were in ’22.”