A recent ceasefire between the US and Iran has sparked a temporary rally in global stock markets and a sharp drop in crude oil prices, but experts warn that consumers should not expect significant relief at the pump or in grocery bills for the foreseeable future.
While the two-week pause in hostilities offers a glimmer of hope, the economic damage inflicted over the past month is expected to have long-lasting effects. The blockade of the Strait of Hormuz—a critical waterway for global trade—has severely disrupted shipments of oil, liquefied natural gas, and fertilizer. Even if a lasting peace deal is secured, analysts estimate it will take months to restart production and normalize supply chains.
"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," says Simon Williams, head of policy at the RAC.
Drivers are unlikely to see a meaningful drop in fuel prices soon. Although crude oil prices have fallen, they remain elevated compared to pre-conflict levels. Williams notes that only a sustained lower price over several weeks would significantly reduce wholesale fuel costs. Some independent fuel stations may pass on savings more quickly, but major reductions are not imminent.
The aviation sector is also feeling the pinch. Jet fuel prices have roughly doubled, leading to higher airfares and route cuts. Willie Walsh of the International Air Transport Association (IATA) states that even if traffic through the Strait resumes immediately, it will take months for supplies to recover. Rachel Winter of Killik & Co adds that refining capacity has been damaged, further delaying the return to normalcy.
Food prices are another major concern. A third of the world's fertilizer typically passes through the Strait of Hormuz, and recent price spikes are expected to ripple through the food supply chain. The Food and Drink Federation warns that UK food inflation could reach at least 9% by year-end, as manufacturers grapple with disrupted supplies of oil, gas, fertilizer, and packaging materials.
"This means manufacturers will continue to feel the impact of supply chain disruptions for oil, gas, fertiliser, packaging materials and essential cleaning chemicals, keeping costs under strain for months to come," says Dr. Liliana Danila, chief economist at the federation.
Household energy bills are also set to remain high. The energy price cap is due for reset in July, and while the ceasefire may ease some pressure, experts caution that wholesale gas prices are likely to stay elevated. Damage to gas infrastructure in Qatar will take years to repair, ensuring continued supply constraints.
In summary, while the ceasefire offers a diplomatic breakthrough, its economic benefits will be slow to materialize. Consumers should brace for persistently high costs for fuel, food, and energy in the coming months as global supply chains work to recover from the disruption.