The recent surge in energy costs arising from the Middle East conflict will ripple through the highly energy-dependent food supply chain, affecting production, packaging, logistics and agricultural inputs. That in turn will bring ongoing food price inflation throughout 2026 and into 2027, according to a new RaboResearch report.
Energy markets have been shaken since the initial attack on Iran five weeks ago, the report notes, with the conflict severely disrupting shipping through the Strait of Hormuz, a critical route for global oil and liquified natural gas (LNG) flows.
As a result, Brent crude prices have risen by 61% and TTF gas prices by 68% compared to pre-war levels. Fuel prices at the pump have also jumped sharply.
RaboResearch’s baseline scenario assumes the war will continue until mid-April, followed by a gradual reopening of the Strait of Hormuz. Even then, energy prices are expected to stay elevated, with oil above $100 per barrel and gas at €60-65 per MWh in the coming months.
Prices should ease in the summer, but 2027 forecasts project numbers well above pre-crisis levels, with Brent around $83 and TTF gas at €42.
Impact on food production cost
Rabobank observes that the food sector is one of the most energy-intensive industries. Core activities, such as cooling, heating, milling, transport, packaging, and the production of agricultural inputs, depend heavily on electricity and fuel.
While many companies learned from the 2022 energy crisis and improved risk-management strategies, they cannot fully shield themselves from sustained price increases, the report states. Energy inputs often occur early in the value chain, and forward contracts or inventories delay the pass-through, meaning that today’s energy shock will influence costs with a lag of several months.
Because food manufacturers and retailers in most of Europe typically negotiate prices annually, most companies cannot immediately pass current peak energy prices through to customers, the report adds.
The expectation of structurally higher costs will therefore dominate end-of-year negotiations for 2027, given that energy accounts for 5-50% of food producers’ cost structures.
“Consumer food prices in Europe are already 33% higher than they were in early 2021, but there is more to come,” the report states. “Research shows a 50% increase in gas prices results in roughly 10% higher food prices after two years.”
Pressure on consumer wallets
Under its current baseline scenario, RaboResearch expects at least 5-10% food inflation in 2027. In a more severe energy scenario, food price inflation could easily be pushed above 10%.
Moreover, rising diesel prices – up more than 30% since the start of the war – are likely already being passed through to consumer prices due to fuel-indexed logistics contracts.
Rabobank observes that consumers have already spent three years trading down to manage grocery bills, shifting to private-label products and cheaper proteins. Another wave of inflation may lead consumers to simply buy less or dine out less frequently.