Will the ceasefire have any impact on UK fuel and food prices?

Will the Ceasefire Have Any Impact on UK Fuel and Food Prices?

A two-week truce has sparked initial economic relief, with global stock markets surging and crude oil prices dropping sharply. However, the long-term effects on consumers remain uncertain, as analysts warn that the damage to supply chains may persist for months. In the past month, vessels transporting oil, liquefied natural gas, and fertiliser have been unable to pass through the Strait of Hormuz, while disruptions in the Gulf have slowed production.

Although a peace agreement could ease tensions, experts suggest it will take time to restore normal operations. The RAC highlights that crude oil prices, though falling, are still above pre-conflict levels, meaning drivers may not see a notable drop in fuel costs soon. Simon Williams, the organization’s policy head, notes that pump prices could stabilize but remain volatile, with some independent stations possibly adjusting faster due to their day-to-day purchasing model.

“The extent of price relief hinges on the ceasefire’s stability, the unimpeded flow of oil through the Strait of Hormuz, and the Gulf’s ability to resume full production,” Williams explains.

Meanwhile, jet fuel prices have climbed to twice their pre-war levels. Willie Walsh of the International Air Transport Association (IATA) states that even with restored traffic through the waterway, it may take months to replenish supply. Airlines have already raised fares, and some have reduced routes, with further price increases expected until then.

“Resuming shipments now won’t immediately lower costs; the refining process and damaged infrastructure will delay any significant price adjustments,” Walsh adds.

Fertiliser costs have risen sharply, as a third of the world’s supply typically traverses the Strait of Hormuz. This has already driven up food transportation expenses in the UK, increased diesel prices for agricultural equipment, and raised energy costs for greenhouse operations. The Food and Drink Federation reports that supply chain disruptions will continue to pressure manufacturers, affecting oil, gas, fertiliser, packaging, and cleaning products for several months.

“The ceasefire doesn’t resolve long-term uncertainties. Recovery of Gulf infrastructure and supply chains could take six months to a year,” says Dr. Liliana Danila, the federation’s chief economist.

Despite the ceasefire, UK food inflation is projected to hit 9% by year-end, according to the federation. While households under Ofgem’s energy price cap have been protected from recent price surges, the cap is set to reset in July. At this stage, the regulator has already begun calculating the new rate, and a major increase is anticipated. The government plans to introduce support based on income, but it may arrive later in the year.

“A pause in conflict reduces immediate pressure on gas markets but doesn’t eliminate ongoing challenges,” notes Dr. Craig Lowrey from Cornwall Insight. “Unless prices fall below pre-war levels, the recent surge in wholesale energy costs will still affect consumer bills.”