Food prices are expected to increase by around 10% this year, as industry leaders caution, even if the Middle East conflict is resolved promptly. The Food and Drink Federation has raised its previous forecast of a 3.2% rise in food and drink prices to now project a surge of between 9% and 10%. This projection hinges on the assumption that the vital Strait of Hormuz will reopen within three weeks and energy production in the Middle East will normalize within a year.
The Food and Drink Federation, representing 12,000 food and drink manufacturers, has significantly adjusted its predictions compared to last September. This shift is a result of the effective closure of the Strait and the disruption and damage to energy infrastructure in the region following the conflict between the US, Israel, and Iran that began in late February.
The ongoing conflict has propelled Brent crude oil and natural gas prices to their highest levels since 2022. This disruption in oil and gas markets is directly impacting production costs for UK food and drink manufacturers, given the industry’s high energy requirements for manufacturing processes.
While larger businesses can mitigate costs through fixed energy contracts, they are bracing for steep price hikes once these contracts expire. Conversely, smaller producers, who typically purchase energy at current rates, are already facing increased prices.
Dr. Liliana Danila, the FDF’s chief economist, expressed concerns about the industry grappling with rising energy bills, transportation costs, and supply chain disruptions concurrently. She emphasized the unprecedented nature of the current situation and the inevitable rise in food inflation in the coming months.
Chris Jaccarini, a food and farming analyst at the Energy and Climate Intelligence Unit, highlighted the alarming forecast of approaching double-digit food inflation, underscoring the repercussions of heavy reliance on fossil fuels. The surge in petrol prices and escalating costs in various sectors like energy, transport, and fertilizers are expected to burden households with higher shopping and energy expenses.
The article also pointed out that the increasing food prices are exacerbated by geopolitical conflicts and climate risks, making food less affordable for many families. The potential return of El Niño and intensification of climate-induced extreme heat further threaten food production, hinting at another financially straining year in 2026 due to conflict and climate-related challenges.
