What does the war in the Middle East mean for the global grocery industry?

The conflict in the Middle East is once again reminding the global food and grocery sector that geopolitics and supermarket shelves are deeply connected. While the situation is rapidly developing and the region is not a dominant exporter of food, it sits at the centre of global energy markets and critical shipping lanes. As tensions disrupt oil flows, raise insurance premiums for cargo vessels, and create uncertainty across trade routes, it is likely the ripple effects will be felt across the global grocery industry.

What should be top of mind for retailers?

For grocery retailers, the most immediate impact comes through cost volatility. The immediate spikes in oil and natural gas prices could translate quickly into higher transport, refrigeration, packaging, and production costs. Grocery retail operates on thin margins, particularly in highly competitive markets such as the UK, Europe, and parts of Asia. If fuel and freight rates climb, retailers will need to decide whether to absorb the increase, renegotiate with suppliers, or pass costs on to shoppers. A common fuel surcharge in most logistics contracts will mean most businesses will see the impact of this within the month.

Retailers will face renewed complexity in forecasting and pricing. The global pandemic and war in Ukraine means that retailers have become well versed to dealing with both availability and inflationary shocks that rock their supply chains. This has elevated the focus in recent years on private label expansion, tighter inventory management, and longer-term supplier contracts to help protect margins. However, despite this effort, retailers will once again find themselves navigating fluctuating commodity markets, shifting currency values, and uncertain shipping timelines.

There is also a strategic dimension. Grocery retailers have accelerated efforts to diversify sourcing and reduce single points of failure within their supply chains to boost resilience. This conflict will once again throw focus on the need to double down on strategic priorities, such as nearshoring fresh and private label products to limit exposure to global shipping volatility. For retailers operating in multiple regions, risk management and geopolitical monitoring will need to be front of mind over the coming week for board-level discussions.

What will be the impact on global supply chains?

The Middle East’s strategic importance lies less in food production and more in logistics and energy. The Strait of Hormuz handles 20% of all oil and a third of natural gas shipments, and instability will push up global energy prices. Qatar is a major exporter of natural gas to Europe with Sauda Arabia, Iraq, Kuwait and Iran all being major oil exporters. All of which, travel through the challenged strait. As costs in these areas rise, food manufacturers in energy-intensive industries relying on natural gas for as their main power grid will feel exposed to cost fluctuations on already tight margins.

Shipping disruptions are another key pressure point. Escalations affecting routes through the Red Sea or nearby waterways can force vessels to reroute around the Cape of Good Hope, adding time and cost to journeys between Asia and Europe. These longer transit times increase freight rates, strain container availability, and raise insurance premiums. For perishable goods and time-sensitive ingredients, delays can mean spoilage risk or supply gaps. Alternatively, the industry could see a temporary shift to air freight, however significant cost and carbon emission increases should be expected, which may not align with wider company strategies.

Commodity markets react quickly to geopolitical uncertainty. Even if physical supply is not immediately constrained. This can drive up costs for globally traded products such as wheat, corn, vegetable oils, sugar, and coffee, plus wider impacts on fertilizer for agriculture. Countries that rely heavily on food imports particularly in parts of Africa and the Middle East itself may see amplified effects, increasing competition for supply on the global market.

The result is not necessarily widespread shortages, but a higher-cost in a more fragile system. Supply chains that have been optimised for efficiency and just-in-time delivery are being tested again. Companies will need to reassess buffer stocks, dual sourcing strategies, and route diversification to build resilience.

What will be the implications for shoppers?

For shoppers, the impact is likely to be gradual rather than dramatic, but noticeable. The most visible effect is price pressure. Categories that are heavily exposed to global commodity markets or long-distance shipping, such as cooking oils, packaged foods, imported produce, coffee and confectionery may see higher or more volatile prices. Meat and dairy can also be affected indirectly through higher feed and transport costs.

Inflationary pressure in food often feels more acute to consumers because groceries are frequent, essential purchases. Even modest percentage increases accumulate quickly in weekly shopping baskets. In markets where household budgets are already stretched by higher housing and energy costs, further food inflation could accelerate trading down behaviour. Shoppers may increasingly switch to private label, reduce discretionary items, or seek promotions more aggressively.

There may also be subtle shifts in availability. If certain imported products face delays or become more expensive to source, retailers may reduce assortment depth or substitute alternative suppliers. While outright shortages are unlikely in most developed markets, range rationalisation and brand rotation could be an option for retailers.

Consumer confidence plays a role as well. Periods of geopolitical instability often dampen spending sentiment. Even if income levels remain stable, uncertainty could lead households to prioritise essentials and cut back on premium or impulse purchases. This behaviour can reshape category performance across grocery retail.

What next?

It is early days, but the situation in the Middle East is rapidly evolving and highlights the interconnected nature of global food and grocery systems. While the region is not the breadbasket of the world, it is central to the energy flows and trade routes that power modern food manufacturing and distribution. For retailers, the conflict introduces renewed cost volatility, strategic sourcing challenges, and margin pressures. For global supply chains, it heightens risks around shipping, fuel prices, and commodity markets. For shoppers, it likely means continued price sensitivity, selective trading down, and subtle shifts in product availability.

In the short term, the industry’s experience navigating pandemic disruptions and recent inflation provides some resilience. But the longer geopolitical tensions persist, the more embedded effects could become in pricing structures and sourcing strategies. The conflict serves as a reminder that food security and grocery affordability are shaped not only by harvests and demand, but also by the stability of the global systems that connect them.

Looking ahead, how could the food industry prepare for instability?

There are key strategies available today, helping both retailers and manufacturers to reduce exposure, improve clarity and protect against geopolitical impacts and we expect to see these continue to gain popularity in the near future:

• Adopting risk management technologies gains foresight, expediting recovery ahead of the market.

• Building energy resilience through sustainable or circular methods reduces exposure to global, sensitive energy markets.

• Accelerating adoption to green logistics, removing reliance on fossil fuels protects cost structures.

• Advancing near-sourcing or diversifying sourcing strategies will reduce exposure across key shipping channels like the Strait of Hormuz, Suez Canal, Taiwan Strait and Panama Canal.

All of which are explored in our recent Supply Chain Trends report. Click here to read it. (IGD Retail Analysis subscribers only).