Bulletin: Inflation risks re-emerge

US - Iran ceasefire ends 

Commercial ships in the Strait of Hormuz have been hit by weapon fire. US and Iranian forces have also exchanged fire.  

Speaking at a NATO summit in Turkey, President Trump stated that the ceasefire between the US and Iran, which began on 08 April, is now over.  

Prices for crude oil have risen somewhat over the last few days, reflecting renewed conflict and uncertainty, but the market response seems muted for now.  

Read IGD’s latest article, US-Iran tensions lift food inflation risk  

IGD opinion 

Shipping in the area restarted when the ceasefire began but remained far below the usual level. Failure of the ceasefire is therefore likely to have only limited impact on movement of goods.  

The main risk comes from higher energy prices and ongoing uncertainty. A major increase in oil prices would have broad impacts, pushing up the cost of production and transport.  

The global food system would share in this process, with higher costs for businesses and higher prices for shoppers.  

The situation remains uncertain and current energy price movements are not sufficient to justify revising IGD's food inflation forecast.  

However, recent developments mean the assumptions underpinning the forecast have become more uncertain. IGD is monitoring the situation. 

OBR warns on debt 

The Office for Budget Responsibility (OBR) has warned that UK public debt could become unsustainable within the next two decades without significant policy action. For food businesses, this matters because reducing debt would almost certainly require lower public spending, higher taxes, or both, limiting household spending power and consumer demand. 

IGD opinion 

The future is uncertain, especially when considered over decades, but it is hard to envisage a situation where current levels of government spending and debt would be sustainable. 

The Fiscal Risks report has always forecast a crisis at some point in the future but, in the new version, it is alarmingly close - 20 years away or less. 

Truly decisive and significant action, lower spending, higher taxes, or both, will be needed to make a material difference to the outcome. 

Moving sooner would offer reassurance to the investors who hold UK debt. If confidence weakens and borrowing costs rise, the situation could deteriorate rapidly. 

The need to manage debt will limit the options available to the next Prime Minister, whatever his personal objectives.  

For food businesses, all available routes are difficult because they ultimately weigh on household prosperity and per-capita demand. 

Heatwave highlights climate resilience challenge 

Large parts of the UK remain subject to heat health alerts, with the current heatwave expected to continue into next week. NHS England has warned of sustained pressure on ambulance services. 

Sea surface temperatures around the UK are also unusually high, with marine heatwave conditions affecting UK waters. 

IGD opinion 

Hot weather can provide a short-term boost to sales of seasonal categories such as soft drinks, ice cream, and barbecue foods. However, increasingly frequent periods of extreme weather also highlight the growing resilience challenge facing the food system. 

Higher temperatures can affect crop yields and quality, agricultural productivity, and soil conditions, while increasing pressure on transport, warehousing, refrigeration, and food safety processes.  

As climate-related disruption becomes more common, businesses will need to become more adaptable and responsive to greater volatility across supply chains. 

IGD's next Resilience report, published on 31 July, will examine how climate, geopolitical, cyber, and economic risks are reshaping food system resilience and where industry and government should focus next. 

Gas supply warning 

Adura, owner of the new Jackdaw gas platform in the North Sea, has urged the government to approve drilling, stating that the facility could supply up to 6% of UK gas demand.  

Earlier this year, a court ruled that drilling licences had been approved improperly, forcing the industry regulator to reconsider. 

Adura Chief Executive Neil McCulloch warned of the UK’s energy vulnerability and the risk of supply shortfalls this winter if the project is not given approval. 

IGD opinion 

Energy remains one of the largest and most volatile costs facing many food businesses. Greater uncertainty around UK gas supply could increase exposure to global energy price volatility, adding to cost pressures and inflation risks across the food supply chain.  

GLP-1 pills now on sale in UK 

Wegovy GLP-1 weight loss medications in tablet form were approved by regulators last month.  

They are not yet available on the NHS, but they went on sale in UK pharmacies this week, including supermarket pharmacies. 

At present, the pill version of the drug seems slightly more expensive than the injection, although some outlets are publicising the pills with introductory offers. 

Discover more about IGD Futures GLP-1 insights programme - Email [email protected] 

One in five farms make a loss 

Around 21% of farms in Great Britain made a loss from farming in the latest year, according to Defra's latest Agriculture in the United Kingdom report. The publication provides a comprehensive overview of UK agriculture and highlights the ongoing economic pressures facing many farming businesses. 

IGD opinion 

Farming is a gruelling and uncertain way of making a living, with high vulnerability to natural forces. For many years, direct subsidies from government helped to offset some of this risk.  

More recently government payments have switched from subsidy to support for specific environmental activities but, overall, cash support is lower now than before. 

Lack of profitability in farming – and across the whole food supply chain – is a challenge to system resilience. This issue was explored by IGD in the recent Food Pound report. 

Reflections from Groundswell 

How can farming become more resilient in an increasingly uncertain world? Following Groundswell 2026, the IGD team shares key insights on regenerative agriculture, resilience and the opportunities shaping the future of UK food and farming. See the latest article.