Food inflation 'could hit 10%' amid Middle East chaos

Industry experts have warned food inflation could hit near to 10 per cent by the end of this year as Donald Trump's war in Iran drives up costs.

Economists for the Food and Drink Federation (FDF) are now predicting food inflation will reach at least 9 per cent by the end of 2026.

This is up from the 3.2 per cent forecast by the FDF, which represents 12,000 food and drink manufacturers, in September last year.

In response to US and Israeli attacks, which began at the end of February, Iran has effectively closed the critical Strait of Hormuz.

This has has caused shipments of oil and gas to grind to a halt and sent global energy prices soaring.

Disruption to oil and gas markets is having a direct and immediate impact on production costs for UK food and drink manufacturers, the FDF said.

This is because it is an industry that requires a lot of energy for the manufacturing process.

Chancellor Rachel Reeves is due to meet supermarket bosses and regulators on Wednesday to discuss the impact on British households of the Middle East crisis.

Industry experts have warned food inflation could hit near to 10 per cent by the end of this year as Donald Trump's war in Iran drives up costs

Chancellor Rachel Reeves is due to meet supermarket bosses and regulators on Wednesday to discuss the impact on British households of the Middle East crisis

The FDF its revision to the inflation forecast is based on the assumption that the Strait of Hormuz opens to cargo traffic within the next two to three weeks and the majority of key facilities, such as oil, gas and fertiliser sites, return to normal within a year.

Many larger businesses are able to hedge costs by fixing energy contracts, but they are preparing for sharp price rises when contracts end, according to the FDF.

Meanwhile, it said smaller producers tend to buy energy 'on the spot' and were already experiencing higher prices.

Dr Liliana Danila, FDF's chief economist, said: 'The food and drink sector is already feeling the force of this geopolitical shock.

'As one of the UK's energy intensive industries, manufacturers are facing mounting energy bills, rising transport and packaging costs and disruption across key supply chains.

'These pressures are hitting simultaneously, and are a significant challenge for businesses to absorb.'

She added: 'The current situation is unprecedented and hard to predict.

'However given the scale and speed of these cost increases, and despite companies' best efforts not to pass price increases on, it's clear that food inflation is going to rise in the months ahead.'