Experts: Gas, grocery and travel prices would rise after Iran war
It is legitimate to wonder when costs for groceries, petrol, plane tickets and other commodities that became more costly during the fight will decrease given the tentative agreement to stop the Iran war. Experts caution against hasty conclusions. Even after oil begins to flow again from West Asia, it may take some time for consumers to notice a change at local fuel pumps, supermarkets, and other retail locations, as indicated by economists and industry analysts. Disputes in the Strait of Hormuz have led to interruptions not only in the supply of crude and refined fuels but also in the supply chains for fertilisers, food, and even footwear. Businesses anticipate that elevated costs will persist, suggesting that their customers may also need to brace for this eventuality. “It is not clear, despite three months of war, that anything has been achieved that makes the American consumer better off,” Brett House said. “In fact, by almost any measure, not just the American consumer, but the world, is worse off as a result of this attack.” If the agreement between the US and Iran remains intact, analysts predict various scenarios regarding the diminishing, or lack thereof, of the war’s impacts in the forthcoming weeks: US motorists may anticipate a degree of alleviation in petrol prices. Following news of the tentative agreement, oil prices declined on Monday to approximately $80 per barrel for the US benchmark crude. That compares to $67 per barrel before the war, and the price of over $120 a barrel reached earlier in the conflict.
Refineries generally procure crude oil well in advance, often a month or more ahead of processing. Consequently, even in the wake of declining oil prices, they will not instantly begin refining less expensive products. “The tendency of gasoline prices to fall slowly is partly because the raw material takes weeks to work through the system until it’s delivered to consumers,” stated Michael Lynch. In regions lacking sufficient refining capacity to satisfy their demands, like the West Coast of the US, petrol prices are expected to decline at a slower pace, according to Mark Barteau. In several Asian and African nations that depend heavily on oil imports from West Asia, the supply shock has resulted in the closure of schools and government offices, alongside directives for remote work, as reported by the International Energy Agency. “The bottom line is that getting back to normal’ will be a lengthy process involving many parties and countries,” Barteau said. “Getting an agreement between the US and Iran to open the strait is just the beginning.” Airlines generally procure fuel ahead of time, modify their schedules incrementally, and set ticket prices largely in response to demand. Consequently, reductions in oil and jet fuel prices may take weeks or even months to be reflected in the pricing of commercial flights. “I think it’s unlikely that we’re going to see a retreat or reduction in the cost of flying at any point this summer,” Columbia’s House stated.
Fuel surcharges implemented by certain airlines beyond the US represent one of the initial sectors where travellers may experience some relief, noted Gordon Ho. “Consumers are going to say, Wait a minute, why are you still charging me a fuel surcharge?” Ho said. Pressure on grocery prices is expected to persist. The reopening of the strait is improbable to provide immediate relief at the grocery store, as noted by David Ortega. Fuel constitutes approximately 15 to 30 percent of the overall food cost, as reported by the Independent Grocers Alliance, which represents a network of 7,500 supermarkets worldwide. However, it may take several months for an energy shock, such as that induced by the Iran war, to permeate the food supply chain and subsequently elevate grocery prices. Ortega noted that once prices increase, they tend to remain elevated for an extended period, particularly in the context of an unpredictable future. Ortega stated, “We’re likely still looking at inflationary pressure on food in the coming months,” Ortega said. “There’s still a good deal of uncertainty about how the reopening will unfold, and it will take time for fuel, diesel and retail fertiliser prices to come back down.” Rabobank indicated that it anticipates war-related food price inflation to reach its zenith in Europe sometime next year. In the United States, grocery prices are projected to increase by 3.2 percent this year, contrasting with a historical average of 2.6 percent, as reported by the US Department of Agriculture.
Farmers continue to face challenges regarding fertiliser availability. The reopening of the Strait of Hormuz would represent a significant development for farmers and the global food production landscape. Approximately 30 percent of global fertiliser transited through the waterway prior to the onset of the conflict. Prices surged as the supply was significantly disrupted, and it is likely that shipments will require an extended period to revert to pre-war levels. The implications of the current shortage confronting farmers are likely to escalate in the future, irrespective of other factors. Numerous farmers globally are navigating planting seasons devoid of the necessary fertiliser or incurring exorbitant costs for both fertiliser and the fuel essential for the production and transportation of their goods. The World Food Program of the United Nations anticipates this will have a “devastating impact” on crop yields, which will subsequently affect food prices and the availability of food for an extended period. Retailers do not foresee a reduction in costs. US retailers specialising in footwear were optimistic about declining petrol prices, believing this could result in increased disposable income for Americans during the back-to-school shopping season, according to Andy Polk, senior vice president of the Footwear Distributors and Retailers of America trade group. However, shoe companies anticipate their own costs remaining elevated for the foreseeable future, Polk stated. The group’s members maintain a two- to three-month inventory of finished products; however, their upcoming orders may involve suppliers imposing higher charges for materials, he stated.
Most of the footwear sold in the US is imported, and Polk indicated an expectation that shipping costs will persist at elevated levels throughout 2026 and 2027. According to him, the tariffs implemented in the United States last year have complicated the ability of shoe retailers to either absorb increased costs or transfer them to consumers. In May, government figures indicated that footwear prices experienced an increase of 5.2 percent compared to the same month in the previous year. Shipping industry costs are expected to experience a gradual recovery. Judah Levine noted that the closure of the Strait of Hormuz has influenced approximately 2 percent to 3 percent of the total volume of container ships utilised for global shipping. However, elevated oil prices and broader disruptions have had a more significant impact on the shipping sector as a whole. Josh Steinitz indicated that consumers may experience elevated shipping costs and an increase in out-of-stock items online through the end of the year. “I think fuel surcharges, which then flow into shipping costs, which then get passed along to consumers, are still going to be with us for quite some time from many of the major carriers,” Steinitz said.
