Will the ceasefire have any impact on UK fuel and food prices?
Will the Ceasefire Have Any Impact on UK Fuel and Food Prices?
The recent two-week ceasefire has provided a brief respite for global markets, with stock exchanges seeing a surge and crude oil prices dropping. However, this relief appears short-lived, as analysts warn the economic effects of the conflict may linger for some time. The disruption in the Strait of Hormuz, which has restricted the movement of oil, liquefied natural gas, and fertiliser, continues to strain supply chains. Damage to Gulf facilities has further slowed production, and even with a peace agreement, it will take months to restore normal operations.
Uncertain Relief for Fuel Costs
Despite the fall in crude oil prices, the cost of fuel remains above pre-war levels. According to the RAC, drivers should not anticipate a major reduction in pump prices soon. Simon Williams, head of policy at the RAC, highlights the uncertainty surrounding the ceasefire’s stability and its ability to resume free oil flow through the Strait of Hormuz. He notes that sustained lower prices over weeks are required to meaningfully reduce wholesale fuel costs.
“Much will depend on the stability of the ceasefire, whether oil shipments can move freely through the Strait of Hormuz, and the longer-term impact on oil production across the Gulf,” says Williams.
Rachel Winter of Killik & Co adds that predicting how quickly pump prices will fall is challenging. “I would expect it to take at least a few weeks, if not a few months,” she told BBC Radio 4’s Today Programme. Meanwhile, jet fuel prices remain roughly double their pre-war levels. Willie Walsh of IATA explains that even with restored traffic, it will take months for supplies to meet demand, keeping air ticket prices elevated.
Food Price Pressures Persist
The ceasefire also offers limited relief for UK food costs. A third of the world’s fertiliser typically passes through the Strait of Hormuz, leading to sharp price increases. This has already driven up transportation costs for food and made diesel more expensive for farmers operating machinery. Crop growers using energy to heat greenhouses will face further hikes when the energy price cap resets in July.
“The ceasefire hasn’t ended the long-term uncertainty,” says Dr Liliana Danila, chief economist of the Food and Drink Federation. “Recovery of supply chains and energy infrastructure in the Gulf is expected to take between six months and a year, keeping costs under strain for months to come.”
With the conflict potentially ending within two weeks, the federation anticipates UK food inflation reaching at least 9% by year-end. Households under Ofgem’s energy price cap have so far avoided the full impact of rising wholesale prices, but the cap’s reset in July could bring significant increases. The government has pledged support based on income levels, though this may arrive later in the year.
Dr Craig Lowrey of Cornwall Insight emphasizes that the ceasefire eases immediate pressure on gas markets but doesn’t eliminate long-term challenges. “Unless prices fall well below pre-conflict levels, the price rises seen through March and early April will still affect household bills,” he says.
Lars Jensen, from the energy analysts at Wood Mackenzie, confirms that the entire supply chain must recover before prices stabilize. “Ships reaching their destinations and refineries operating at full capacity will take weeks, not days,” he adds.
