Food prices could surge to over 8% amid Iran war

British families may face significant strain on their household budgets this summer, as ongoing conflicts involving Iran are predicted to drive food prices up by more than 8%, analysts have warned.

The Institute of Grocery Distribution has stated that food inflation could more than double from the current rate of 3.6 per cent to over 8 per cent by June, particularly under a severe energy disruption scenario.

Even in a moderate scenario, annual price increases could reach 4.8 per cent, potentially adding around £150 to the average grocery bill.

These warnings follow the release of inflation data on Wednesday, which indicated that prices had stabilised before the escalation of the conflict in Iran.

James Walton, chief economist at the institute of grocery distribution, said: “Even in the best case scenario, the conflict in the Middle East is likely to prolong the timeline for recovery from the cost of living crisis.

Chancellor Rachel Reeves noted that the economic impact of this crisis could be “significant. They said that contingency plans are in place to provide targeted support for households most affected once the energy price cap expires in late June.

Contingency planning is taking place for every eventuality so that we can keep costs down for everyone and support those who need it most,” Ms Reeves said, emphasising the need to balance assistance with fiscal responsibility.

Motorists are already feeling the financial burden. The RAC Foundation estimates that drivers have spent an additional £307 million on fuel since the US-Israeli strikes on Iran on February 28. Petrol prices reached 144.2p per litre on Monday—the highest since July 2024—while diesel prices surged by 24.7p to 166.9p per litre, the highest level since March 2023, according to the Department for Energy Security and Net Zero.

The government plans to enhance the powers of the Competition and Markets Authority, introducing a framework to combat “price gouging” at gas stations. Additionally, Ms Reeves is scheduled to meet with supermarket and banking executives to discuss potential support for consumers.

Conservative leader Kemi Badenoch has called for cuts to energy taxes, increased North Sea production, and criticised the planned hikes in fuel duties, accusing the Labour government of being “caught with its pants down” regarding rising costs.