Market News

Food inflation could hit 9% in the UK this year even if the strait of Hormuz opens within the next few weeks, figures suggest, as the Iran war pushes up energy prices.

The Food and Drink Federation (FDF), which represents 12,000 food and drink manufacturers, has predicted prices will rise by “at least” 9% by the end of 2026, almost tripling a forecast of 3.2% that was made before the Middle East conflict.

The chancellor, Rachel Reeves, met supermarket bosses on Wednesday to discuss how to ease any impact of cost inflation on prices at the till, while global markets rallied on remarks from Donald Trump suggesting the war could end in “two to three weeks”.

The FTSE 100 shut 1.8% higher on Wednesday, its biggest one-day gain in almost a year. Oil fell as low as $98.35 a barrel at one point, its lowest level in a week, before returning to nearer $102.

Dr Liliana Danila, the chief economist at the FDF, said the industry was already facing big rises in energy, transport and packaging costs, as well as disruptions across its supply chains.

“The current situation is unprecedented and hard to predict,” she said. “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.”

The 9% forecast assumes that the strait of Hormuz, a key shipping channel, will reopen to cargo traffic within the next two to three weeks, and the majority of large energy facilities, such as oil, gas and fertiliser sites, return to normal within a year.

Retailers including the bosses of Tesco, Sainsbury’s, Morrisons, Marks & Spencer, Aldi and Lidl met Reeves and the environment secretary, Emma Reynolds, at No 11 Downing Street on Wednesday.

They are understood to have asked the chancellor to take action to ease cost pressures, with help on energy bills and a delay on new regulatory fees or adjustments such as on packaging, unhealthy food and employment rights.

A government spokesperson said it was a “positive meeting” and businesses and ministers had “agreed to work together to explore what more can be done to ease the cost of living for consumers and strengthen supply chains”.

One attender said the meeting had been “very constructive”, adding that the government had been particularly willing to try to find ways to help with energy bills as “this runs through the whole supply chain”.

UK farmers and producers have said that without government help with surging energy bills there could be shortages of domestic tomatoes, cucumbers, peppers and aubergines.