Inflation risk: Iran war could trigger a second wave hitting groceries

The conflict centered on Iran has produced an energy shock that is already filtering through fuel markets and, according to analysts, risks producing a second inflation wave that will extend beyond gasoline to groceries and other consumer goods. Reuters reporting highlights fertilizer and diesel shortages as key transmission channels for this next round of price rises.

The situation unfolded as maritime disruptions and strikes on regional infrastructure pushed crude and refined product prices higher; diesel margins and war-risk insurance for shipping widened markedly. International organisations including the U.N. Food and Agriculture Organization (FAO) and lenders such as the European Bank for Reconstruction and Development (EBRD) warned that cuts to ammonia and urea flows and higher freight costs are already lifting input bills for farmers and food processors. Market participants cited by Reuters point to fertiliser shortages and elevated diesel as drivers that can transmit energy cost shocks into food prices.

In the United States, the March consumer price index showed a notable monthly jump that captured much of the immediate oil-price impact; economists expect secondary effects — notably from diesel-driven transport costs and higher fertiliser prices — to push core goods prices higher in the months ahead. Those pass-through dynamics could erode real incomes and weigh on consumer spending if the shock proves persistent.

In a broader economic context, energy-led shocks typically raise production and logistics costs rapidly, while fertilizer disruptions can reduce agricultural yields with a lag, creating a durable upward pressure on food prices. Emerging markets are particularly vulnerable because food and energy account for a larger share of household spending, but auto‑adjustments in global supply chains mean advanced economies are not immune to the knock-on effects. Policy buffers such as strategic reserves are limited for fertilisers, increasing downside risk.

Analysts say the near-term outlook depends on the duration of disruptions in the Strait of Hormuz and regional supply chains. If energy and fertiliser flows are restored quickly, some price relief is possible; if not, central banks may face a tougher trade-off between containing inflation and supporting growth. Traders and policymakers will closely monitor diesel and fertiliser markets, shipping costs, and upcoming monthly inflation prints for signs that a second, broader inflation wave is materialising.