Food Prices May Rise ‘Within Weeks’ Then Remain Elevated If Iran Conflict Persists

Food prices are expected to increase within weeks if the Middle East conflict continues due to shipping being rerouted thousands of kilometres, adding delays and increasing costs for transport, fuel, energy, insurance, and fertilisers.

Trade and retail experts warn that perishable goods and energy‑sensitive products could be hit first as the higher cost of moving goods filters through to supermarket shelves.

The deeper concern, however, is that prices could settle at a new, permanently higher ‘normal’, rather than falling back once pressures ease.

James Mills, head of policy at Logistics UK, explained that despite resilient UK supply chains, the war is causing many shipments to be diverted thousands of kilometres around the Cape of Good Hope rather than using usual channels, adding around two weeks to journeys and significantly increasing costs. 

"If the conflict continues, people may notice that energy price rises continue and that feeds into higher transport and production costs and that gradually feeds into higher food prices," Mills said.

Perishable goods and products highly exposed to energy prices are set to feel the impact first, as constrained air cargo capacity and higher fuel costs bite. 

“Perishable goods would be impacted the quickest,” Mills noted. "I'd say fresh produce and those areas will probably be more sensitive to air cargo capacity being constrained. Anything that's sensitive to energy markets will obviously be impacted by that as well.” 

Higher Prices Could Last For Some Time

The British Retail Consortium (BRC) has cautioned that the longer shipping routes and elevated energy prices could push up inflation, and headline prices for an extended period, echoing the impact of Russia’s invasion of Ukraine. 

“We saw this following the Russian invasion of Ukraine when higher energy prices drove up manufacturing costs,” pointed out Andrew Opie, director of food and sustainability at the BRC. “Since energy is a significant component of our production costs, sustained increases directly impact the prices of the goods we sell.”

War risk insurance for large oil tankers has soared from hundreds of thousands of dollars to several million per voyage. 

Plus Logistics UK estimates that about 10,000 passenger flights – which also carry freight – have been cancelled, reducing global cargo capacity.

The organisation’s Mills stresses that the key pricing issue is duration, pointing out that prices tend to “shoot up like a stone and come down like a feather”.

This raises the risk of a new, permanently higher “new normal” rather than a temporary spike. 

Retailers and suppliers are working to manage the disruption, but BRC urges government to keep other controllable inflationary pressures down to protect households.

Rising Fertiliser Prices Hits UK Production

For UK food production, the fallout is already tangible, affecting the price of fuel and fertilisers, which are key inputs as spring planting gets underway. 

Volatile and partially withdrawn fertiliser and red diesel prices mean farmers and growers may not know what they will have to pay or whether they can secure supplies at all.

Around a third of crucial fertilisers such as urea and ammonium nitrate usually pass through the Strait of Hormuz, with the war now effectively shutting this trade route, which has pushed up costs and uncertainty.

NFU president Tom Bradshaw likens the situation to the Ukraine shock, warning that the “pure economics” of crop production have become extremely challenging and “massively inflationary”. 

“We don't necessarily have the ability to put the price up and we're going to need the whole supply chain to work together to try to mitigate the impacts of this,” Bradshaw noted. “But inevitably the inflationary pressure is there in the supply chain now and it has gone through to the retail shelf.”

The NFU said it is assessing whether conditions are severe enough to justify government intervention since many members will not be able to afford the inputs needed to keep producing food if the war’s impacts turn out to be medium term rather than short-lived.

As tensions rage on in the Middle East, Bradshaw met with Defra Secretary Emma Reynolds and Farming Minister Dame Angela Eagle on Wednesday (11 March) to discuss the UK’s food resilience. 

Bradshaw stressed the need for greater price visibility, to help farmers make informed decisions, and confidence that availability will continue, alongside access to natural gas for horticultural production.

Source: Sky News