Bulletin: Conflict raises energy risks
19 March 2026Updates on Middle East risks, NEET employment support, Feeding Britain’s Future, jobs and wages, interest rates, inflation and land use.
Conflict pushes energy price higher
The Middle East conflict has escalated following attacks on Iranian oil and gas infrastructure, including the South Pars gas field, a critical global energy asset.
Iran has responded with strikes on regional energy facilities and renewed threats to shipping and infrastructure across the Gulf, heightening supply risks.
US President Donald Trump warned of further escalation if Iranian retaliation continues, increasing market uncertainty.
Oil prices have risen sharply, with Brent crude moving above $105 per barrel, reflecting fears of prolonged supply disruption.
UK wholesales gas prices increased by to 169p per therm, up nearly 30% from the week before, driven by concerns about LNG supply and disruption through the Strait of Hormuz.
Disruption to energy shipping through the Strait of Hormuz is keeping global energy prices elevated as conflict in the Middle East continues.
The situation is dynamic but, at time of writing, the US is struggling to find allies who will co-operate in enforcing maritime security. This suggests that disruption will continue for some time.
See our recent article: Oil and gas prices, conflict, and UK food inflation
IGD opinion
Short‑term spikes in oil and gas prices do not automatically feed through into higher food prices, particularly where businesses have hedged energy costs or operate under fixed‑price contracts. The key risk is not volatility, but duration.
If elevated energy prices persist, they act as a cost amplifier across the food system, raising costs for transport, fertiliser, heating, packaging and processing. History shows it is prolonged periods of high energy prices, rather than short‑lived shocks, that are most closely associated with sustained food inflation.
While UK food availability is unlikely to be immediately affected, cost pressures would feed through with a lag, particularly in energy‑intensive categories.
Higher inflation outlook
The Bank of England Monetary Policy Committee has voted to hold interest rates held at 3.75%, with near‑term cuts now unlikely.
The Bank now expects inflation to rise to around 3.5% in the near term, delaying a return to the 2% target. They had previously predicted CPI inflation would decline to the 2% target in Q2 2026.
They warned that persistently high oil and gas prices could create second‑round effects on wages and prices if prolonged
The Bank acknowledged weak underlying economic momentum, with higher energy costs likely to weigh further on activity
New support for employing NEETs
To help employers fill entry-level vacancies while reducing long-term youth unemployment, the government has launched a new Youth Jobs Grant. Employers will receive £3,000 for hiring an unemployed 18–24-year-old who has been on Universal Credit for at least six months.
The scheme targets a specific subgroup within those classed as not in education, employment or training (NEET): 18–24-year-olds who are unemployed and claiming Universal Credit. DWP estimates it will support 60,000 young people into jobs over the next three years.
There is also an announcement of an apprenticeship incentive payment worth £2,000 for each 16- to 24-year-old hired by a small or medium sized business.
Read IGD’s latest thinking Food and Drink Workforce – A Quiet Crisis Building?
IGD opinion
This initiative is one of several active measures intended to move people into the UK workforce and it makes sense in itself. However, it does not address all drivers of NEET status, particularly:
Economic inactivity due to ill health
Skills mismatches
Young people not engaged with Jobcentre Plus
Those not claiming benefits (a sizeable share of NEETs)
Furthermore, research shows that many persons who are NEET have complex issues that block them from work. The more issues they have, the more likely they are to be NEET. Making the transition from inactivity to work will not be easy for the job candidate or the potential employer.
The UK education and training system does not consistently deliver candidates who are fully work-ready. Employers often report gaps in basic skills and workplace culture.
While initiatives such as T Levels and apprenticeship reforms are promising, it will take time for these changes to translate into a larger, better-prepared talent pipeline for food and drink businesses.
IGD relaunch of Feeding Britain’s Future
The food industry needs a collective effort to encourage and support young people to pursue opportunities in the sector. Feeding Britain’s Future is a UK food and drink industry united movement, in partnership with IGD, to build a confident, skilled, and future-ready workforce.
The shared ambition is to build a future-fit workforce for the UK food industry by 2030 through collective commitments and scalable interventions:
Provide free, cross industry early-career learning to build confidence and highlight long-term careers in food and drink.
Deliver a national schools programme to build skills, confidence and awareness of sector opportunities.
Increase visibility of food sector careers across widely used careers platforms and digital channels.
Establish strategic university partnerships to raise the profile of food and drink careers.
Deliver scalable work experience opportunities to build confidence and practical skills for young people.
Bring the industry together to amplify a collective voice and champion food and drink careers including its youth focused Mmmake Your Mark campaign.
As well as asking businesses to commit to supporting the interventions, we are also calling for a strengthened government partnership. This includes a national workforce strategy for food and drink, reform of the Growth and Skills Levy, greater certainty on seasonal and skills-based immigration routes and improved alignment between Jobcentre support, local skills planning and the needs of a strategically critical sector.
For more information or to understand how your organisation can get involved, please contact the team.
Increase in youth unemployment
Latest labour market data reveals a cooling labour market:
Youth unemployment (ages 18–24) has risen to 14.5%, its highest level since 2015, driven by increases over both the quarter and the year
Wage growth continued to ease, with regular pay (ex‑bonuses) slowing to 3.8%, the weakest rate in over five years, reducing domestic inflation pressure
Unemployment remained unchanged at 5.2% in the three months to January, close to post‑pandemic highs, signalling a cooling jobs market
Vacancies were broadly stable at around 721,000, suggesting demand for labour is no longer falling sharply but remains subdued
Land use framework
The government has published England’s first Land Use Framework, setting out a new, long‑term approach to managing competing demands on land. New elements include:
A single national framework to balance food security, housing, clean energy and nature restoration
Use of advanced land‑use modelling and data, including a national spatial map to support better decisions
A clear commitment that food production can be maintained alongside environmental and development goals
A move away from siloed decisions, promoting multi‑functional land use
A framework that guides rather than directs landowners, with updates planned every five years
Help for household heating costs
Rising heating oil prices are adding pressure for households that rely on oil, with rural areas and Northern Ireland particularly exposed.
The government has allocated £50m to help the least well off households afford oil, to be distributed from April via the Crisis Resilience Fund (CRF). The government has also promised to investigate possible regulation of the heating oil market, which is not price-regulated in the same way as electricity and gas.
IGD opinion
£50m is not a huge sum, but deploying support quickly will help. Eligibility criteria are unclear at this stage, with local councils deciding who qualifies.
A bigger question is how surges in energy costs will impact the essential businesses that shoppers rely on.
Any increase in the cost of jet fuel, bunker fuel (for ships), red diesel (for farm vehicles) or any of the other energy sources used to supply shoppers will eventually show up in retail prices.
So far, there is no sign of support for business energy costs.
New inflation methodology
ONS has updated how it calculates key inflation measures. Some updates are part of the annual refresh (the “basket” and “weightings”), but one methodological shift is more fundamental.
The “basket” of sample goods and services used to collect price data has been refreshed, as happens annually at this time. Food and drink changes on this occasion are the addition of croissants, houmous, baby food and non-alcoholic beer.
The “weightings” used for calculating inflation have also seen annual revision. Food and drink now count for 109 out of 1,000 CPI “points”, down from 113 last year. This makes food and drink slightly less influential when calculating overall inflation.
Finally, from February 2026, price data for food and drink will be based on 50% store scanning data and 50% field surveys, rather than 100% surveys. This change will appear in inflation reporting from February, which will be published later this month.
IGD opinion
The change to sampling method for food and drink is very welcome. It will mean that all purchases are captured (wider price coverage) and it will capture the actual prices paid by shoppers including the benefit of loyalty pricing (more accurate coverage).
The question is what impact this will have on inflation levels. ONS estimates that it will mean a there bas point reduction in all items CPI inflation. Since food and drink is about 10% of the overall inflation basket, it is likely that inflation for this category will fall by about 0.3%.
ONS does not intend to re-state older inflation data, so expect to see a small step down in inflation between January and February. This will be a statistical effect, not an actual change in the experiences of shoppers. Some of this may be wiped away shortly by the price impacts of war in the Middle East.