Will the ceasefire have any impact on UK fuel and food prices?
Will the Ceasefire Influence UK Fuel and Food Costs?
The recent announcement of a two-week truce has brought some short-term respite to global markets, with stock indices rising and crude oil prices dropping sharply. However, analysts caution that these benefits are likely fleeting, as the conflict’s broader economic consequences continue to unfold.
Production Halted, Supplies Disrupted
Over the past month, vessels transporting oil, liquefied natural gas, and fertiliser have faced blockades in the Strait of Hormuz, while major damage to Gulf infrastructure has crippled output. Even with the ceasefire holding and a peace agreement finalised, experts estimate it could take several months to restore normal supply chains. The RAC notes that crude oil remains above pre-war levels, so drivers shouldn’t anticipate a notable decrease in fuel costs soon.
“The extent of the relief will hinge on the ceasefire’s stability, the ease of oil movement through the strait, and the Gulf’s long-term production recovery,” says Simon Williams, head of policy at the RAC.
Meanwhile, jet fuel prices have doubled since the conflict began. Willie Walsh of the International Air Transport Association (IATA) warns that resuming traffic through the strait won’t immediately lower costs, as refining facilities in the region are also damaged. Some airlines have already raised fares, while others have reduced routes. Rachel Winter from Killik & Co adds that even with oil flowing freely, refining delays will prolong the price surge.
Food Inflation and Fertiliser Costs
Recent weeks have seen fertiliser prices spike, as a third of global supplies typically pass through the Strait of Hormuz. This has already driven up transportation costs for food in the UK and increased expenses for farmers using diesel-powered machinery. Crop growers relying on energy to heat greenhouses will also face higher bills when the energy price cap resets in July.
“The ceasefire hasn’t resolved long-term supply chain uncertainty,” explains Dr Liliana Danila, chief economist at the Food and Drink Federation. “Rebuilding Gulf infrastructure could take six months to a year, meaning manufacturers will still grapple with elevated costs for oil, gas, packaging, and cleaning materials.”
Despite the ceasefire, the Federation anticipates UK food inflation reaching at least 9% by year’s end. Ofgem’s current energy price cap has shielded households from wholesale price spikes, but the reset in July may not fully offset the ongoing impact. Dr Craig Lowrey of Cornwall Insight highlights that while the truce eases immediate gas market pressures, it doesn’t eliminate the upward trend in energy costs.
“Unless prices fall significantly below pre-conflict levels, the price increases seen in March and April will persist in utility bills,” Lowrey warns.
Alan Gelder of Wood Mackenzie underscores that the entire supply chain must normalise, with ships reaching their destinations and refineries operating again. “This will take weeks, not days,” he states. Lars Jensen from the International Energy Agency further notes that the ceasefire’s success depends on sustained reductions in oil prices, which may only materialise over time.
