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 brought short-term relief to global markets, with stock exchanges seeing a surge and crude oil prices falling. However, economists warn that the benefits for everyday consumers may be limited, as the conflict’s lasting effects on supply chains have already begun to ripple through the economy.

Over the past month, maritime traffic in the Strait of Hormuz faced severe disruptions, preventing oil, liquefied natural gas, and fertiliser from reaching their destinations. Damage to Gulf facilities further reduced production capacity, creating a bottleneck. Analysts suggest it could take months to fully restore operations and normalise supply levels, despite the ceasefire’s promise.

Crude oil, though currently lower than its peak, remains above pre-war prices. According to the RAC, drivers might not see a major drop in pump costs soon. Simon Williams, the organisation’s policy head, highlights the ongoing uncertainty, noting that smaller independent petrol stations could adjust prices more swiftly if oil costs decline.

“The extent of relief will hinge on the ceasefire’s stability, the resumption of oil shipments through the Strait of Hormuz, and the Gulf’s ability to resume production,” Williams added.

Jet fuel prices are roughly double their pre-war levels, affecting air travel costs. Willie Walsh of the International Air Transport Association (IATA) explains that even with the strait reopening, refining capacity damage will delay supply adjustments, leading to sustained higher fares.

Meanwhile, fertiliser costs have spiked due to reduced shipping through the Strait of Hormuz. This has increased expenses for UK food transport and agricultural operations, particularly for diesel-powered machinery and greenhouse energy use. The Food and Drink Federation’s Dr Liliana Danila estimates that supply chain recovery in the Gulf could take six months to a year, prolonging cost pressures on manufacturers.

“Manufacturers will continue grappling with supply chain challenges for oil, gas, fertiliser, packaging, and cleaning chemicals, keeping inflationary pressures in place,” Danila stated.

The energy price cap, which protects households from wholesale price spikes, is set to reset in July. With the cap recalculating over a three-month window, experts anticipate a significant rise. The government has pledged support based on income levels but suggests it might arrive later in the year.

“A ceasefire eases immediate gas market pressure but doesn’t erase the long-term strain,” said Dr Craig Lowrey of Cornwall Insight. “Unless prices drop below pre-conflict levels, the cost increases from March and April will still affect bills.”

As the ceasefire holds, the focus remains on restoring energy infrastructure and stabilising the supply chain. Lars Jensen from Wood Mackenzie notes that this process will require “weeks, not days,” to ensure all links in the fuel and food distribution network return to normal. The full effect on UK inflation, particularly food prices, is expected to unfold over the coming months.