Managing the Impact; the Short and Long Term View – Middle East Conflict
The ongoing conflict in the Middle East is beginning to translate into cost pressures across the supply chain, initially visible in fuel and logistics, but now extending more broadly.
In the early stages, these changes are fragmented, emerging through surcharges, delivery adjustments, and selective price increases, limiting short-term cost visibility.
This highlights the interconnected nature of supply chains and the implications for cost structures and operating models in the months ahead. This document outlines the current market conditions across key categories and the potential implications for purchasing, operations, and supply chain planning.
*The outlook reflects current market conditions and available market insight as of May 2026 and may continue to evolve as conditions develop.
What’s happening now (May/June 2026)
The initial impact of disruption is most visible in food categories exposed to logistics and air freight, where cost increases are being driven primarily by fuel and transport. This phase is defined by the speed and fragmentation of change, with costs emerging through surcharges and delivery adjustments rather than coordinated pricing shifts. Early upstream pressure across energy and fertiliser costs is also beginning to impact energy-intensive produce categories, particularly greenhouse-grown products.
While inflation in April fell to 2.8%, down from 3.3% in March, it’s still widely expected to rise in the coming months as the impact of the Middle East conflict is felt more directly in the UK
Key cost drivers:
- Fuel and aviation cost increases
- Air freight disruption
- Immediate supplier cost pass-through.
| The situation | How organisations may adapt | |
| Food | Cost increases are concentrated in transport-intensive categories, particularly imported and air-freighted products. Fish and seafood categories remain among the most exposed due to fuel-intensive fishing and imported supply chains, while energy-intensive greenhouse produce categories such as tomatoes, cucumbers, and peppers are also beginning to experience cost pressure linked to energy, fertiliser, and transport volatility. | Greater flexibility across sourcing, product formats, and seasonal availability is likely to become increasingly important as organisations respond to ongoing pressure across highly impacted imported categories. |
What this signals
Initial cost pressure is concentrated within a small number of highly exposed categories rather than across the full system. Fish and seafood remain among the most exposed due to reliance on fuelintensive fishing and imported supply chains.
What this means
Early cost increases are emerging unevenly but may broaden if disruption continues, increasing pressure on margins and shortterm cost control.
Where this is heading
Short-term adjustments such as surcharges and delivery changes are likely to shape broader pricing resets as suppliers respond to sustained transport costs. Early responses are expected to focus on operational resilience, supply continuity, and greater flexibility across more exposed categories.
What’s happening in one to three months (June – August 2026)
During this period, cost pressures are expected to extend beyond logistics-led categories into energy, materials, and production inputs, making inflation more sustained across the value chain. What may initially appear as isolated increases is expected to become more consistent as higher operating costs continue feeding through the supply chain.
Key cost drivers
- Energy costs flowing into manufacturing and processing
- Rising costs of packaging, chemicals, and raw materials
- Continued exposure to transport, imports, and currency movement.
| The situation | How organisations may adapt | |
| Food | Cost pressures are expected to broaden across ingredients, packaging, and production, increasing focus on menu design, sourcing flexibility, and product specification. Fish and seafood categories are likely to face continued sourcing and availability pressures, while oils, dry goods, and energy-intensive dairy categories such as butter and cream are expected to be exposed to elevated input costs. Agricultural input markets also continue to experience volatility, with upstream pressure expected to contribute to sustained cost movement across protein and produce categories over the medium term. | Seasonal sourcing, menu flexibility, and alternative product formats may help reduce exposure to sustained packaging, transport, and production cost pressures, particularly across imported produce categories facing continued availability and transport volatility. |
| Retail | Retail cost pressures are expected to increase across ambient and packaged goods, driving tighter range control and more consistent pricing movement. Bakery, grocery, and packaged categories are also likely to remain under pressure as energy, packaging, transport, and raw material costs continue feeding through the supply chain. | Greater focus on core ranges and value-led product lines may become increasingly visible as organisations simplify operations and prioritise margin resilience. |
| Non-food | Cost pressures are expected to extend across consumables and utilities, driving closer alignment between service levels and cost, particularly across packaging-intensive and disposable categories exposed to raw material and energy pressures. | Service models may increasingly adapt through specification changes and consumable optimisation as raw material and energy costs continue to rise. |
| Distribution | Fuel and transport pressures may continue to drive higher delivery charges and influence delivery planning and operational efficiency. | More structured procurement planning and stronger demand visibility may support improved cost control as transport pressures continue to evolve. |
What this signals
Cost pressures are becoming more embedded across the value chain rather than remaining isolated to specific categories.
Why it matters
Managing cost is increasingly shifting beyond procurement alone toward operational decisions across menus, product ranges, service frequency, and sourcing strategy.
Where this is heading
As cost pressures broaden, organisations are expected to adapt earlier through changes to sourcing, product range, and service delivery, with greater flexibility and seasonal planning becoming increasingly important as pricing movement extends across categories.
*Agriculture and Horticulture Development Board (AHDB) Market Report
What’s happening in three to six months (September – November 2026)
During this period, cost pressures are expected to become more widespread across the value chain, with short-term adjustments giving way to broader changes in sourcing, pricing, and operating models. Pricing pressure may become more visible across products, services, and customer offers as organisations respond to evolving market conditions.
At the same time, growing price sensitivity is expected to influence demand, product range, and format decisions across both food and retail categories.
Key cost drivers
- Persistently high energy and input costs
- Growing customer price sensitivity and demand shifts.
| The situation | How organisations may adapt | |
| Food | Cost pressure is expected to remain elevated across categories exposed to fertiliser, feed, fuel, and energy intensive manufacturing inputs. Produce, protein, oils, and selected manufactured categories are likely to remain among the most exposed as upstream agricultural, transport, and production costs continue feeding through the supply chain. | Greater use of locally sourced products and operational simplicity may support resilience against ongoing transport and production cost pressures. Simplified menus and lower-volatility ingredients are also expected to become increasingly common. |
| Retail | Cost pressures across retail categories are expected to continue driving tighter range control and greater focus on value, margin resilience, and assortment simplification. | Value-led product ranges may become increasingly important as organisations balance affordability, margin resilience, and tighter assortment control. |
| Non-food | Cost pressures are expected to become more visible across consumables, utilities, and service delivery, driving closer alignment between service levels and cost. | Service models may increasingly adapt through specification changes, adjusted service levels, and greater use of alternative consumables. |
| Distribution | Transport and logistics costs are expected to become more embedded within pricing and service structures, increasing pressure on delivery efficiency and planning. | Greater focus on delivery efficiency, operational planning, and demand visibility may increasingly support longer-term transport cost control. |
What this signals
Cost pressures are becoming more embedded within operating models rather than remaining short-term disruptions.
Why it matters
Organisations are increasingly shifting from short-term mitigation toward structural changes in sourcing, menu planning, operational efficiency, and supplier strategy.
Where this is heading
Operating models are expected to increasingly prioritise efficiency, resilience, and long-term cost stability through simplified ranges, sourcing flexibility, and more standardised service models.
What’s happening in six + months (December 2026 onwards)
The market is expected to move towards a more stable operating environment, with organisations increasingly adapting to evolving cost and supply chain conditions.
Greater focus on resilience, efficiency, and long-term cost management is likely to become increasingly important.
Key cost drivers
- Embedded energy, labour, and input cost increases
- Normalisation of higher supply chain and distribution costs
- Increased focus on efficiency, productivity, and margin discipline
| The situation | How organisations may adapt | |
| Food | As we move into the winter months, pressure from the supply base is expected to increase, particularly across fuel (energy) and new season crops carrying higher fertiliser costs. Within fruit and vegetables, the seasonal shift from UK supply to Europe and North Africa increases exposure to evolving Middle East market conditions, with fuel and energy costs likely to contribute to further market pressure. Dairy and bakery categories are expected to remain exposed to elevated feed, fuel, fertiliser, and grain market pressures as winter demand and seasonal supply dynamics continue to evolve. | Greater sourcing flexibility (such as using locally sourced products) and operational simplicity may continue as organisations prioritise long-term cost control and supply continuity. |
| Retail | Retail categories is expected to be focused on margin resilience, assortment efficiency, and customer value, with ambient grocery and packaged lines remaining key areas of focus as organisations prioritise longer shelf life, supply continuity, and operational simplicity. | Prioritising simplified assortments, valueled ranges, and core high-volume product lines to support affordability and margin resilience. |
| Non-food | Non-food categories are expected to remain exposed to ongoing energy and raw material cost pressure. | Greater focus on service specification and consumable optimisation. |
| Distribution | Transport and distribution costs are expected to remain under pressure as elevated fuel, energy, and utility costs continue feeding through logistics and delivery operations. | Greater focus on operational efficiency and delivery planning. |
What this signals
Cost disruption is becoming embedded within long-term operating models and supply chain design rather than remaining a short-term pressure.
Why it matters
Organisations that balance sourcing resilience, operational efficiency, and simplified operating models are likely to be better positioned to manage long-term cost pressure and maintain competitiveness.
Where this is heading
This phase marks a shift toward operating within a structurally higher cost environment, where efficiency, resilience, and operational control become increasingly important. Supply resilience, sourcing flexibility, and operational efficiency are expected to become key long-term differentiators.
As cost and supply pressures become increasingly interconnected, organisations with stronger market visibility, sourcing flexibility, and procurement expertise are likely to be better positioned to respond to ongoing volatility.
Data has been sourced from our own internal insight and intelligence.