Oil and gas prices, conflict, and UK food inflation

Global prices for oil and gas have been volatile in recent days, rising recently, briefly spiking above $100 before falling back, in early March 2026, and have raised food inflation risks. We examine impacts on costs, shoppers, business strategy, and the limits of government support.

Conflict in the Middle East has again pushed energy markets into the spotlight. Crude oil and gas prices have been highly volatile. For food and drink businesses, the key issue is not short-term market swings, but whether elevated energy costs persist for long enough to disrupt the recent easing in food inflation.

This explainer article examines how oil and gas prices feed through the food system, what history tells us about inflation risks, and what this means for shoppers, businesses, and policy in the months ahead.

Does a high oil price mean higher food inflation?

Not automatically – but sustained triple-digit prices materially raise the risk

Oil and gas are critical inputs across the food system: powering transport, heating glasshouses, producing fertiliser and manufacturing packaging. Short-lived price spikes are often absorbed within supply chains and rarely feed directly into shelf prices. Many businesses “hedge” energy price risk via forward-buying in any case. However, when energy prices rise sharply and remain elevated for an extended period, the risk of cost pass-through increases.

This is the point at which contracts reset, hedging strategies unwind and pricing assumptions across supply chains begin to change.

Disruption to energy markets, especially production and transport in the Persian Gulf area, has increased the likelihood that higher energy costs will persist, rather than fade. While UK food availability may not be immediately affected, input costs across production, processing and logistics rise cumulatively, feeding through with a lag, from the top of the system to the bottom.

History reinforces this point. Since the oil shocks of the 1970s, periods of prolonged energy price stress – rather than short-term volatility – have been most closely associated with sustained food inflation. Energy acts as a cost amplifier, intensifying existing pressures rather than acting alone.

How do oil and gas prices feed into food inflation?

Oil is an important driver – but gas prices can matter as much, or more

Food inflation is shaped by a combination of energy costs, labour availability, fertiliser prices, currency movements, and retailer pricing strategies. Oil prices matter most when they coincide with broader supply-side stress.

Gas prices often have a more direct and faster impact. Gas is a critical input for fertiliser production, food manufacturing, glasshouse growing, and electricity generation. As a result, gas price shocks tend to feed through more quickly and more directly into agricultural and processing costs than oil alone.

The experience following Russia’s invasion of Ukraine illustrates this clearly. Oil prices rose sharply in early 2022, but food inflation surged because energy shocks coincided with fertiliser shortages, disrupted grain markets, and tight labour supply. UK retail food inflation peaked at around 19% in spring 2023, roughly a year after costs began rising, highlighting the lag between energy shocks and prices on shelves.

IGD’s latest Viewpoint report warns that a similar – though likely smaller – risk now exists. If elevated oil prices were to coincide with renewed gas market stress, pressure across fertilisers, transport and energy intensive food manufacturing would intensify, increasing the likelihood that costs filter through more quickly than during periods of moderate volatility.

What does history tell us about oil, conflict, and food prices?

Geopolitics acts as an intensifier – not the sole cause – of food inflation

Since the oil shocks of the 1970s, major geopolitical events affecting oil supply preceded periods of elevated global food prices. However, sustained food inflation has tended to emerge only when energy price rises were prolonged and accompanied by wider supply side disruption, including fertiliser shortages or reduced supply chain flexibility.

Modern food systems remain highly energy-intensive, meaning they are still vulnerable to these dynamics, even though efficiency gains and hedging strategies have improved resilience compared with earlier decades.

How high could oil prices go this time?

Upside risks have shifted materially, despite recent volatility

Oil prices have now moved sharply in both directions recently, reflecting heightened geopolitical risk alongside changing market sentiment. While prices have fallen back from recent highs, the underlying risk remains that disruption to flows through the Strait of Hormuz – one of the world’s most critical energy chokepoints – could push prices higher again if disruption proves sustained.

Investment banks including Goldman Sachs have warned that if severely reduced Hormuz flows persist for several weeks, Brent prices could move well beyond $100, with scenarios in which sustained disruption would require significant demand destruction to rebalance markets.

At the same time, producer-side commentary has become more explicit. Officials in Kuwait and other Gulf producers have warned that a full or prolonged closure of Hormuz could push oil prices towards $150 a barrel, highlighting the scale of tail risk now being discussed within oil exporting countries themselves.

While such outcomes are not IGD’s base case for our food inflation forecasts, they underline that risks are skewed to the upside rather than symmetric.

What does this mean for food inflation?

The risk is not a repeat of 2022–23 – but disinflation is no longer assured

IGD’s Viewpoint Special: Spring Forecast as global risks intensify report shows food inflation easing in early 2026. However, this improvement now looks increasingly fragile. If oil prices remain elevated for an extended period, or if higher oil prices coincide with renewed gas market stress, the risk shifts from continued disinflation to an interruption in that trend.

Looking historically, food and energy prices were already rising post‑Covid before Russia’s invasion of Ukraine triggered a sharp spike in global gas and fertiliser prices. Fertiliser price rises were less pronounced than gas, reflecting behavioural responses such as farmers delaying or skipping application once prices reach extreme levels.

Food price inflation typically peaked 6–9 months after the initial energy and fertiliser shock. This delay reflects the structure of the food supply chain, where multiple contracts, hedging strategies and dedicated production arrangements slow the pass‑through of higher costs.

The chart above illustrates this lagged relationship: energy and fertiliser prices move first, with food inflation following later rather than rising immediately.

The chart is illustrative rather than predictive and does not represent IGD’s food inflation forecast.

However, it highlights why renewed gas market stress would materially increase the risk that higher energy costs feed through more quickly than during periods of more moderate volatility.

Crucially, current risks point to renewed, faster‑building inflationary pressure rather than a return to the extreme inflation seen in 2022–23, with food prices remaining elevated for longer rather than continuing a smooth disinflation path.

Could government intervention return?

The experience of 2022 shows that governments are willing to intervene in energy markets when price shocks threaten household affordability and broader economic stability. Following Russia’s invasion of Ukraine, wholesale gas and electricity prices surged to unprecedented levels, prompting the UK government to introduce the Energy Price Guarantee.

However, that intervention was exceptional in both scale and fiscal cost and was driven primarily by extreme gas price shocks rather than oil prices alone. Importantly, support for businesses at the time was far more limited than support for households, with larger businesses seeing little direct benefit.

While renewed energy price rises linked to higher oil prices would increase inflationary pressure, a repeat of broad-based energy subsidies would require severe and sustained gas price shocks, not simply elevated oil prices. Businesses should therefore not assume that future energy-driven inflation will be offset by government support to the same extent as in 2022–23.

How could this impact consumer food shopping?

History suggests renewed food inflation quickly reshapes behaviour

IGD ShopperVista data shows that food prices carry a disproportionate weight in household decision-making, influencing both product and store choice. During the 2021–23 inflation surge, rising food prices were associated with weaker shopper confidence and more defensive behaviour, including heightened price sensitivity and trading down.

Higher petrol prices would add further pressure, particularly for lower-income households, who spend a higher share of their income on essentials and often have fewer alternatives to car use. Fuel costs are highly visible and consistently rank among the prices shoppers are most concerned about, alongside food and energy bills.

Even before higher costs fully fed through to shelves, expectations of rising prices reduced confidence and spending intent. As a result, any interruption to disinflation driven by sustained high energy prices would be likely to dampen confidence and reinforce value-seeking behaviour.

What should food businesses focus on now?

Plan for volatility – and for higher for longer energy costs

Food and drink businesses should stress test exposure to sustained periods of elevated oil and gas prices, review supply chain resilience and avoid assuming recent easing in inflation will continue uninterrupted. This includes assessing the role of circularity, such as turning waste or by-products into fuel, to reduce exposure to future energy price spikes.

With household incomes forecast to grow only weakly, passing on higher costs may prove increasingly difficult. This reinforces the need for early action, scenario planning, and margin protection strategies, rather than reactive pricing once pressures are already embedded.

In summary

Oil prices do not drive food inflation on their own. However, when elevated oil prices coincide with gas market stress and geopolitical disruption, they can become a powerful catalyst for renewed inflationary pressure.

For food and drink businesses, the risk is no longer just volatility but a potential shift in the inflation regime. While impacts may still build with a lag, sustained periods of high energy prices materially increase the likelihood, speed, and scale of cost pass through, testing margins, pricing strategies, and consumer affordability through 2026 and beyond.