UK energy stocks tumbled after Chancellor Rachel Reeves announced government plans to delink gas prices from electricity costs, raising fears of squeezed profit margins for power generators. The move, aimed at lowering consumer electricity bills, sent shares of major UK energy firms sharply lower as investors recalibrated expectations for sector earnings.

The proposed policy would break the current link between expensive gas-fired generation and overall electricity pricing, potentially reducing wholesale power costs. However, analysts warn that while beneficial for consumers, the measure could significantly impact the profitability of energy producers who have benefited from high gas prices in recent years.

Market reaction was swift, with benchmark energy indices declining as traders assessed the implications of the government's intervention. The delinking proposal adds to regulatory uncertainty in the UK energy sector, which has already faced windfall taxes and price caps in recent years. Industry groups are likely to push back against the measure, arguing it could deter investment in new generation capacity needed for the UK's energy transition.