Middle East conflict beginning to filter through into prices
Responding to the latest CPI inflation figures, which show headline inflation rising to 3.3% and food inflation rising to 3.7%, Harvir Dhillon, economist at the British Retail Consortium, said: “The first signs of inflationary pressure stemming from the conflict in the Middle East began to emerge last month, driven largely by rising fuel prices. Across retail, the picture was mixed. Intense competition pushed clothing and footwear back into deflation, but in the grocery sector, mounting cost pressures saw food inflation creep up. Ahead, if food prices follow a similar trend as seen following the Ukraine-Russia conflict, prices will start to ramp up more notably throughout 2026.
“Although the energy price cap and removal of green levies may provide some near-term relief, inflation will rise over the coming quarters as the full impact of the Middle East conflict filters through. As a more energy intensive sector, supermarkets and their supply chains are likely to be disproportionately affected. With food prices set to rise, it is lower income households that will be hit hardest. Government must target support towards these retailers, in particular looking at non-commodity charges which push up the cost of businesses’ energy bills. This will help mitigate the peak in food inflation, reducing the squeeze on households.”