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

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

Global stock markets surged, and crude oil prices dropped sharply following news of a two-week ceasefire. However, analysts caution that this relief may only be short-lived, as concerns about prolonged economic consequences persist. In the past month, the Strait of Hormuz has seen oil tankers, liquefied natural gas vessels, and fertilizer ships blocked, while damage to Gulf infrastructure has disrupted production. Even with a ceasefire holding and peace talks progressing, it could take months to restore normal supply levels, according to experts.

“Much will depend on the stability of the ceasefire, whether oil shipments can move freely through the Strait of Hormuz, and the longer-term impact on oil production across the Gulf,”

Simon Williams, head of policy at the RAC, notes that while the ceasefire reduces immediate pressure, drivers may not see a major decline in pump prices soon. Crude oil remains above pre-war levels, and he highlights the uncertainty surrounding fuel costs. Some smaller independent stations, which purchase oil daily rather than in advance, could potentially lower prices more quickly.

Jet fuel prices have nearly doubled since the conflict began, and Willie Walsh of the International Air Transport Association (IATA) suggests it may take months for fares to stabilize. Even with the strait reopened, refining capacity and damaged facilities could delay supply recovery. “The whole supply chain needs to return to normal, with ships reaching their destinations and refineries restarting operations,”

“That’ll take ‘weeks, not days,’”

Alan Gelder from Wood Mackenzie emphasizes. Meanwhile, fertilizer prices have spiked due to the strait’s role in global trade, with a third of the world’s supply typically passing through. This has increased costs for food transport and agricultural operations in the UK, as diesel prices rise and energy-dependent greenhouses face higher expenses when the price cap resets in July.

The Food and Drink Federation warns that the ceasefire has not resolved long-term supply chain challenges. Dr. Liliana Danila, the federation’s chief economist, estimates Gulf recovery could take six months to a year. This means manufacturers will continue dealing with inflated costs for oil, gas, packaging, and cleaning materials. As a result, UK food inflation is projected to reach at least 9% by year-end, even if the conflict ends soon.

Ofgem’s energy price cap has so far protected households from the recent surge in wholesale prices. However, the cap will reset in July, and experts anticipate a significant increase. The government has pledged support based on income levels but may delay implementing measures until autumn. Dr. Craig Lowrey from Cornwall Insight adds that while the ceasefire eases gas market pressures, it does not eliminate long-term price impacts. “Unless prices fall well below pre-conflict levels, the wholesale price hikes seen in March and early April will still affect bills,”