Food prices are expected to increase by around 10% this year, even if the Middle East conflict is resolved promptly, according to industry leaders. The Food and Drink Federation has adjusted its forecast for food and drink price rises from 3.2% to a range between 9% and 10%. This projection is based on the assumption that the crucial Strait of Hormuz will reopen within three weeks and energy production in the Middle East will return to normal within a year.
The FDF, representing 12,000 food and drink manufacturers, has significantly revised its previous forecasts due to the closure of the Strait and damage to energy infrastructure caused by the conflict between the US and Israel against Iran since late February. This conflict has led to soaring Brent crude oil and natural gas prices, reaching their highest levels since 2022.
The disruption in oil and gas markets is directly impacting production costs for UK food and drink manufacturers, as the industry heavily relies on energy for manufacturing processes. While larger businesses can hedge costs through fixed energy contracts, smaller producers purchasing energy on short notice are already facing increased prices.
Dr. Liliana Danila, FDF’s chief economist, highlighted the challenges faced by the food and drink sector, including rising energy bills, transportation costs, and supply chain disruptions. She noted the unprecedented nature of the current situation and the likelihood of food inflation rising in the coming months despite efforts to minimize price increases.
Chris Jaccarini, a food and farming analyst at the Energy and Climate Intelligence Unit, expressed concern over the potential double-digit food inflation, emphasizing the impact of the Middle East conflict on fossil fuel dependence. Rising petrol prices and increased costs for energy, transport, and other inputs are expected to affect families through higher shopping and energy bills.
The analyst also mentioned the previous fossil fuel crisis triggered by Russia’s invasion of Ukraine, which led to a significant increase in food prices. Climate impacts on food production further compounded these costs, making food less affordable for many families. With ongoing climate risks and potential return of El Niño affecting food production, 2026 is anticipated to be another challenging year for the industry.
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