Food prices are more likely to rise than fall this summer if disruption in the Strait of Hormuz continues, but the effect is likely to be indirect rather than immediate.
The UK imports relatively little food directly through the Strait of Hormuz. However, the Strait is one of the world's most important energy chokepoints, with around 20% of global oil trade and significant volumes of liquefied natural gas normally passing through it. Disruption raises global energy prices, which then feed into food production, processing, packaging and transport costs.
There are three main ways this affects food prices:
- Transport costs: Higher diesel and fuel costs increase the cost of moving food around the UK and internationally.
- Fertiliser costs: The Middle East is a major producer of fertilisers and fertiliser feedstocks. Higher energy prices and supply disruptions can raise farming costs, which eventually feed through to food prices.
- Food processing and refrigeration: Energy-intensive industries such as food manufacturing, storage and refrigeration become more expensive to operate.
Several analysts have warned that continued disruption could push food inflation significantly higher. Industry forecasts earlier this year suggested UK food inflation could rise sharply if energy markets remain under pressure, even if the Strait eventually reopens.
That said, there are reasons not to panic. Supermarkets often absorb some cost increases; many producers hedge fuel and energy costs months in advance, and some food categories are more exposed than others. Fresh produce, imported foods and energy-intensive products are likely to feel the impact sooner than staple foods.
So the balance of probability is that the Strait of Hormuz situation will add upward pressure to UK food prices over the summer, but it is unlikely to trigger a sudden supermarket-price shock unless the disruption worsens significantly or continues into the autumn.
