Wheat prices are surging, nearing their biggest weekly jump since February, as the conflict in the Middle East collides with severe weather concerns to threaten global food supplies. Chicago wheat futures are up almost 4.5% this week, driven by worries over dry conditions in the US Plains and the economic fallout from the war involving Iran, which began at the end of February.
From Field to Fork: A Chain Reaction of Disruption
The ripple effects of the conflict are rapidly transmitting far beyond the wheat pit. A new report from the humanitarian organisation Mercy Corps warns that disruptions to fuel, fertiliser, and shipping are crippling import-dependent economies, with consequences now “locked in” for 2026 and 2027 in some of the world’s most fragile nations. Its research details a perfect storm: global fertiliser prices have surged during critical planting periods, while in some markets fuel prices rose as much as 150% within days, driving up transport and irrigation costs. The cost of water has doubled in drought-affected areas of Somalia.
Compounding this, commercial shipping through the critical Strait of Hormuz has fallen by more than 90%, severely constraining agricultural supply chains. Humanitarian shipments are being forced onto much longer routes; deliveries to Sudan are being rerouted via the Cape of Good Hope, adding roughly 6,000 miles and up to three weeks to transit times. The World Food Programme estimates these combined pressures could push 45 million additional people into acute hunger globally.
The damage to future harvests is being cemented now. The Mercy Corps report notes that disruptions lasting more than 40 days—a threshold passed in early April—trigger changes in farmer behaviour, such as reduced fertiliser use and switching crops, which determine future yields. This is affecting planting seasons currently underway in Somalia, Ethiopia, and Pakistan.
Broader Economic Shockwaves Hit Home
The shock is reverberating through developed economies, reigniting inflationary pressures. Capital Economics predicts UK food inflation could almost double by mid-2027, rising from 3.3% in February to 6.0%. The Food and Drink Federation has issued a much starker revised forecast, predicting food inflation could reach at least 9% by the end of 2026, a significant increase from a previous forecast of 3.2%. This revised outlook assumes the Strait of Hormuz reopens within weeks and energy production normalises within a year.
Other critical sectors are facing immediate strain. The International Energy Agency has warned that Europe may have only six weeks of jet fuel left if the Strait of Hormuz blockage persists. The International Air Transport Association’s director general, Willie Walsh, has suggested flights in Europe could be cancelled due to a lack of jet fuel starting from the end of May, a situation already occurring in parts of Asia. Approximately 40% of Europe’s jet fuel imports normally pass through the strait.
In the UK, a slight dip in fuel prices offers only marginal relief. Petrol has fallen to just below 158p a litre on average and diesel to 190.94p, their first decline since the conflict began. However, petrol remains 19% higher than pre-conflict levels, and diesel is still 48% more expensive. This comes as Office for National Statistics data shows two-thirds of adults reported their cost of living had increased compared to a month ago, with 75% citing fuel prices as a reason, up from 38% in February.
Similarly, mortgage rates have dipped slightly, with lenders like Santander and TSB cutting some fixed rates. The average two-year fixed residential mortgage rate is now 5.87%. However, this follows a period of sharp increases since March, and the Bank of England held its base rate at 3.75% in March, signalling potential hikes later in the year.
In response to the energy crisis, Chancellor Rachel Reeves has indicated the government is actively considering ways to break the link between electricity and gas prices, a move that could pressure utility companies but ease costs for consumers.
The Gathering Storm for UK Businesses
For UK businesses, these accumulating pressures are tipping the balance towards failure. New data from the Insolvency Service shows a 7% rise in company insolvencies in England and Wales in March, to 2,022. The increase was largely driven by over 100 connected companies in the Real Estate sector entering administration, which the service suggested might be a “one-off event.” However, restructuring experts warn the underlying trend is grim.
Giuseppe Parla, restructuring & insolvency director at Menzies LLP, stated that ongoing tensions in the Middle East are driving up energy and fuel costs, disrupting supply chains, and keeping inflation high. He warned that the UK economy is expected to be among the most exposed in the developed world, and much of this impact has not yet filtered through to company balance sheets. “This combination means we are likely at the foot of a mountain of insolvencies, rather than sitting at its peak,” he said.
Matthew Richards, joint head of restructuring & insolvency at Azets, echoed the concern, noting an increasing number of directors are seeking advice as rising costs prove to be a tipping point. He warned that with the war likely to continue and additional costs like business rates changes taking effect, demand for insolvency support will likely increase in the coming months.
The human cost of the crisis is also drawing criticism of geopolitical decisions. David Miliband, former Foreign Secretary and head of the International Rescue Committee, warned that cuts to overseas aid by countries including the US and the UK risk stoking global economic instability. He said the US “abandoning” its aid programme and the Keir Starmer government’s decision to slash the UK’s aid budget were misguided, arguing that supporting the world’s poorest is morally right and a “good investment for Britain.” The UK’s official development assistance is planned to fall from 0.5% to 0.3% of Gross National Income by 2027.
