Fuel and Food Price Pressures Likely to Persist for Months

When news of a two‑week cease‑fire involving Iran emerged, equity markets around the world surged and the price of crude oil dropped sharply. However, the optimism surrounding the financial markets does not automatically translate into immediate relief for households facing higher energy and food costs. Many experts stress that the damage inflicted on global supply routes and production facilities is likely to reverberate for an extended period.

In recent weeks, vessels transporting crude oil, liquefied natural gas and fertiliser have faced effective blockades in the strategically vital Strait of Hormuz. At the same time, critical infrastructure in the Gulf region has suffered substantial damage, curtailing output and disrupting the flow of commodities.

Even if the cease‑fire holds and diplomatic negotiations produce a lasting peace settlement, analysts aGree that re‑establishing normal production levels and restoring the free movement of ships will require several months. The logistical chain that moves oil from offshore platforms to refineries and ultimately to retail stations is complex, and each link must be repaired or cleared before supply can stabilise.

No Immediate Change to Rising Fuel Prices

Despite today’s lower crude oil price, the level remains above the price observed before the conflict began. The RAC cautions drivers not to anticipate a rapid decline in pump prices in the near term.

Simon Williams, head of policy at the RAC, explains that uncertainty remains high for motorists. The most realistic scenario, according to Simon Williams, is a halt to the recent upward trend in pump prices rather than a swift dip.

Simon Williams notes that certain smaller, independent forecourts—those that purchase fuel on a day‑by‑day basis rather than locking in forward contracts—could be quicker to reflect any price reductions at the pump.

“Much will depend on the stability of the cease‑fire, whether oil shipments can move freely through the Strait of Hormuz, and the longer‑term impact on oil production across the Gulf,” Simon Williams states.

Simon Williams adds that a sustained period of lower crude prices, extending over several weeks, is necessary before wholesale fuel costs begin to fall in a way that would be noticeable to consumers.

Rachel Winter of the wealth‑management firm Killik & Co points out the difficulty of predicting the exact timing of any pump‑price relief. “I would expect it to take at least a few weeks, if not a few months,” Rachel Winter told Gree Radio 4’s Today Programme.

In the aviation sector, the price of jet fuel has roughly doubled compared with pre‑conflict levels. Willie Walsh, chief executive of the International Air Transport Association (IATA), warns that even if maritime traffic through the Strait resumes promptly, the supply chain required to bring jet fuel to market will remain strained for months.

Willie Walsh says passengers should prepare for higher ticket prices in the meantime. Some airlines have already increased fares, while others have trimmed routes as a response to the elevated fuel costs.

Even if jet fuel were to flow through the narrow waterway without delay, it still must undergo refining, a process hampered by damage to key facilities. Alan Gelder, senior vice‑president of Refining, Chemicals and Oil Markets at Wood Mackenzie, explains that the entire supply chain—including the arrival of tankers at the correct ports and the restart of refinery operations—must return to normal. Alan Gelder estimates that this will take “weeks, not days.”

Food Still Expected to Become More Pricey

Approximately one‑third of the world’s fertiliser passes through the Strait of Hormuz, and the recent disruptions have driven fertiliser prices sharply upward. The ripple effect is already being felt across the food sector.

Transport costs for food items moving across the United Kingdom have risen, and farmers are confronting higher diesel expenses for operating agricultural machinery. In addition, growers who rely on energy‑intensive heating for Greenhouses anticipate further cost pressures when the energy price cap is reset later in the year.

The Food and Drink Federation, which represents thousands of manufacturers in the United Kingdom, says the cease‑fire has not eliminated the “long‑term uncertainty” that continues to affect the industry. Dr Liliana Danila, chief economist of the Food and Drink Federation, projects that the restoration of supply chains and energy infrastructure in the Gulf region will require between six months and a year.

Dr Liliana Danila explains, “This means manufacturers will continue to feel the impact of supply chain disruptions for oil, gas, fertiliser, packaging materials and essential cleaning chemicals, keeping costs under strain for months to come.”

Even if the conflict were to conclude within the next fortnight, Dr Liliana Danila expects food‑price inflation in the United Kingdom to reach at least nine percent before the end of the year.

Wholesale Gas Prices Likely to Stay High

Households that fall under Ofgem’s energy‑price‑cap regime have thus far been insulated from the surge in wholesale energy costs. The next recalibration of the cap is scheduled for the middle of the year, and the regulator is already halfway through the three‑month calculation window.

Industry experts have been forecasting a noticeable increase in the cap at this stage. The government has pledged targeted support based on household income, but officials have suggested that the full relief package may not be delivered until the autumn months.

Craig Lowrey, principal consultant at Cornwall Insight, observes that while a cease‑fire eases some immediate pressures on the gas market, it does not erase the legacy effects of the conflict. Craig Lowrey adds, “If the strait opens and stays open this will ease prices and be reflected in the July price cap, but unless prices fall well below where they were before the conflict, the wholesale price rises seen through March and early April will still feed through to bills.”

Lars Jensen of Vespucci Maritime notes that shipping companies will seek clear assurances regarding the safety of vessel transits. Lars Jensen does not believe that a two‑week pause will be sufficient to rebuild confidence among shippers.

“We should see an increase in exiting vessels,” Lars Jensen told Today. “We will likely also begin to see a trickle of vessels going into the Gulf, but those two will not be of the same magnitude.”

Beyond the movement of ships through the Strait, Craig Lowrey points out that damage to gas‑related infrastructure in Qatar will take years to remediate, meaning that supply constraints will persist. As a result, Craig Lowrey concludes that wholesale gas prices are expected to remain elevated for a considerable period, limiting the extent to which the July price cap can be reduced.