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What the Iran war means for food

Rising inflation, commodity disruption and weakening consumer demand are affecting agricultural markets and manufacturers’ cost strategies.

According to the United Nations’ (UN) FAO Food Price Index, in March, the war in Iran contributed to a rise in global food prices, increasing by 2.4%.

For the second month in a row, prices spiked, largely due to the squeeze energy restrictions are having on vegetable oil and sugar prices. Moving and processing food costs increased, driven by higher energy and fertiliser prices.

Europe has experienced rising and falling food inflation over the past decade, reaching a peak of 19.19% in March 2023. Increasing energy prices were a leading driver then.

Now, with the war in Iran, markets and companies are again preparing for prices to go up and revising their strategies.

The worrying mix of rising energy and input costs collides with lower consumer demand. With slowed economic growth and waning consumer appetite for spending on food, investments and marketing promotions may be hit.

Stagflation – when high inflation combines with weak economic growth – is a challenge for manufacturers, prompting them to manage rising costs and declining consumer demand.

How energy-related pressures affect food

The war, which began less than two months ago, is already affecting food and drink commodities.

“Vegetable oils, sugar, corn and wheat are among the agricultural commodities most affected by the conflict so far,” Carlos Mera, head of agrifood commodities market research at Rabobank, told Ingredients Network.

Vegetable oils are used in biodiesel production, while corn and sugar are key feedstocks for ethanol. As energy prices have risen, biofuel demand has increased in several countries, mainly due to higher mandates, lending additional support to these markets.

Wheat and corn are also being indirectly affected by higher fertiliser costs.

“Fertiliser production is highly energy-intensive, and supply chains are also vulnerable to disruptions around the Strait of Hormuz, through which an estimated 30% of global urea trade transits,” Mera said.

Elevated fertiliser prices are therefore expected to weigh on planting decisions, particularly in the upcoming southern hemisphere’s wheat plantings.

By contrast, commodities such as coffee and cocoa have been relatively less affected.

“Prices for both remain well above current costs of production, meaning producers are less likely to cut back on fertiliser use despite higher input prices,” Mera added.

FDF: food inflation is going to rise

In the UK, industry trade association, the Food and Drink Federation (FDF), has amended its inflation forecast, predicting inflation will almost triple by the end of 2026. Food inflation is now expected to reach 9 to 10% by the end of the year, compared with its previous prediction of 3.2%, made before the start of the war.

On 1 April, the trade association said this is based on the assumption that the Strait of Hormuz would reopen in two weeks – currently not the case – and that energy production in the Middle East will resume within a year.

“The food and drink sector is already feeling the force of this geopolitical shock,” said Dr Liliana Danila, chief economist at FDF.

Input costs and supply chain disruptions are already affecting product prices. In April, UK company Princes Group announced it would implement a minimum 5% price increase because of the war.

“The current situation is unprecedented and hard to predict, however given the scale and speed of these cost increases, and despite companies’ best efforts not to pass price increases on, it’s clear that food inflation is going to rise in the months ahead,” said Danila.

How can agricultural markets prepare?

Manufacturers will likely be trying to gauge how the war in Iran is expected to affect input costs, supply chains, and R&D pipelines. Their attention will be on how to respond and adapt in the coming months.

Using the energy market as a point of reference, energy prices are currently very high, but the market is pricing lower energy prices in the future.

“This signals a market expectation that the closure of Hormuz is temporary,”said Mera, speaking to Ingredients Network on 15th April 2026. “With this in mind, we expect some normalisation in agricultural markets too.”

In the northern hemisphere, Rabobank’s insights indicate that farmers had enough fertiliser to plant in the spring for the most part, and any switching is marginal. However, a reduction in wheat planting area in the southern hemisphere is likely. For instance, the planting season in Argentina and Australia is currently underway, and fertiliser prices are very high.

Certain markets may be affected more than others due to their location and planting season. “If Hormuz were to be closed for longer, corn plantings could be severely curtailed in the southern hemisphere, but the planting window in key corn producer Brazil will only start in October,” said Mera.

Stealth energy savings: Roast coffee and bake bread for less time

There is a silver lining. “The price changes we are seeing on agricultural commodities so far are not enough to result in significant adaptations in food or beverage,” said Mera.

Energy costs, though, could alter F&B manufacturers’ production processes. “Higher cost of energy could provide incentives towards lower energy processing,” Mera added. For example, some coffee could be roasted less, favouring lighter roasts over dark roasts. Bread can, in some cases, be baked for less time.

The biggest change on supermarket shelves will most likely come from fresh produce. Because it is flown by aeroplane, it is becoming more expensive due to high energy costs, particularly the high price of jet fuel, currently penalising this category.