Food prices spiked in March as Middle East conflict drove up energy costs, UN says

Food prices rose sharply in March as war in the Middle East drove up energy prices and freight costs around the world, a UN report says.An index of food commodity prices by the UN’s food and agriculture organisation increased by 2.4% in March, its second consecutive monthly rise.The index – which tracks grain, sugar, meat, dairy and vegetable oil costs – had risen for the first time in five months in February.The biggest increases were in vegetable oil and sugar prices, which increased by 5% and 7% respectively in March.There are fears that the war in the Middle East could trigger elevated food inflation, as higher fuel, fertiliser and electricity prices push up the cost of moving, processing and cooking food.About a third of fertiliser production travels through the Strait of Hormuz, a key shipping channel that has in effect been closed since the start of the war. UN projections indicate that global prices could average 15% to 20% higher in the first half of 2026 if the crisis persists.The report says: “Price indices across all commodity groups – cereals, meat, dairy, vegetable oils and sugar – rose to varying degrees, reflecting not only underlying market fundamentals but also responses to higher energy prices linked to the conflict escalation in the near east.”Global wheat prices rose by 4.3% in March, it found, partly driven by deteriorating crop conditions and drought concerns in the US, as well as lower levels of planting in Australia owing to higher fertiliser costs. This was partly offset by better crop conditions in Europe, according to the report, and strong export competition.In the UK, the Food and Drink Federation, which represents 12,000 food and drink manufacturers, has predicted food 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.Even that forecast assumes that the strait 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 – both of which are far from certain.British farmers have already reported that producers of salad vegetables and dairy are running into problems. The British Tomato Growers’ Association has warned that shoppers could see an increase in the price of tomatoes, peppers and cucumbers in the next six weeks as a result of rising costs of heating glasshouses using gas.This week the chancellor, Rachel Reeves, met retailers including the bosses of Tesco, Sainsbury’s, Morrisons, Marks & Spencer, Aldi and Lidl to discuss what could be done to ease the cost of living for consumers and how to strengthen supply chains.However, companies across the UK are expected to raise their prices more rapidly in the coming months. A survey by the Bank of England of more than 2,000 chief financial officers found that they now expect to raise their prices by an average of 3.7% over the coming year.That represents a rise from 3.4% in February, while the bosses’ expectation of inflation across the economy rose from 3% to 3.5%.