Key takeaways:
- Rising tensions around Iran and the Strait of Hormuz could push up costs for bakery, snacks and breakfast cereals by disrupting energy, fertiliser and shipping markets.
- Higher fertiliser prices and tighter Gulf shipping routes could ripple into grain and vegetable oil markets, affecting key ingredients such as wheat, corn and soybean oil used across food manufacturing.
- With new US tariff proposals adding further trade uncertainty, food producers may face overlapping pressures on ingredients, packaging, logistics and overall supply chain costs.
For industries built on wheat, oils and large-scale processing, the gap between geopolitical disruption and supermarket shelves can be surprisingly short. With tensions rising around Iran, several of the signals food manufacturers watch most closely are starting to move.
The conflict is already unsettling energy markets and shipping routes, with particular concern around the Strait of Hormuz – the narrow Gulf passage that links some of the world’s largest oil producers with global markets. If disruption deepens, the consequences won’t stop with oil tankers. The cost structure behind everyday foods – from bread and biscuits to crisps and cornflakes – could start to shift.
Food manufacturers may not trade oil or run cargo ships, but their operations are tightly connected to both. Ovens, fryers and processing lines run on energy. Grains depend on fertiliser. Packaging relies heavily on petrochemicals. When pressure builds in those markets, food production costs rarely stay untouched.
Energy volatility: The hidden ingredient in food production
Food manufacturing is energy intensive, and bakery, snack and breakfast cereal production sits near the top of the list.
Large bakeries keep ovens running for long stretches of the day. Snack factories depend on high-temperature fryers and extrusion equipment, while cereal plants toast and dry grains before packaging. All of it requires substantial amounts of gas and electricity.
That’s why volatility in oil and gas markets tends to reach these sectors quickly.
The Strait of Hormuz sits at the centre of this dynamic. Roughly a fifth of the world’s oil supply passes through the corridor, making it one of the most sensitive routes in global trade. When tensions rise, shipping companies, insurers and commodity traders start adjusting risk calculations almost immediately.
Higher energy costs don’t just affect fuel. They also influence refrigeration, distribution and packaging production. Many food packaging materials – including plastic films and laminates – are derived from petrochemicals, meaning energy price swings can filter through to packaging costs as well.
Even when commodity prices remain stable, the cost of producing finished food can still rise.
Fertiliser: the slow-burn risk for grains and oils
Energy markets react quickly to geopolitical shocks. Fertiliser markets often move more slowly but the consequences can be just as significant.
Around a third of global fertiliser raw materials pass through the Strait of Hormuz, highlighting how disruption in the corridor could quickly ripple through agricultural supply chains. When those flows tighten, farmers feel it first.
The last major fertiliser shock offers a clear precedent. After Russia’s invasion of Ukraine pushed fertiliser prices sharply higher in 2022, grain markets followed. Wheat, corn and oilseed prices rose as farmers faced higher input costs. The same dynamic could play out again.
Fertiliser prices influence planting decisions, application rates and ultimately crop yields. That feeds directly into the economics of wheat, corn and oilseed production. Those crops form the backbone for bakery, snack and cereal manufacturers.
Vegetable oils are another pressure point. Soybean oil – widely used in frying savoury snacks and in some cereal processing – is closely linked to oilseed markets and energy prices. If fertiliser costs climb or shipping routes tighten, the economics of soybean crushing can change quickly, pushing oil prices higher.
Tariffs, geopolitics and a more fragile supply chain
Geopolitical tension is also colliding with renewed trade uncertainty. This week, analysts criticised plans by US President Donald Trump to introduce a 15% global tariff, warning that the move could inject additional volatility into international trade.
“At face value, a likely move to a 15% global tariff – especially after legal setbacks and conflicting messaging – reinforces the theme that US trade policy remains politically driven,” said Daniela Hathorn, senior market analyst at Capital.com. “A higher global tariff effectively acts as a consumption tax. If implemented at 15%, it could lift import costs across a broad range of goods.”
For global food manufacturers, several risks are starting to overlap. Tariffs raise the price of imported ingredients, packaging and equipment. Energy volatility pushes up production and logistics costs. Shipping disruption slows supply chains and lifts freight rates.
Raj Abrol, CEO of Galytix, said companies across sectors are now dealing with multiple sources of uncertainty. “Surging tariffs, fluctuating oil prices and disruption to shipping driven by conflict in the Middle East means managing risk is now a top priority,” he said. “With uncertainty now the new normal, market intelligence data is an essential asset.”
Why bakery and snacks are exposed
Some parts of the food industry are more sensitive to these pressures than others. Bakery and cereal manufacturers rely heavily on grains. Snack producers depend on vegetable oils, potatoes and corn. Those crops are shaped by fertiliser prices, energy costs and global trade flows.
Production adds another layer of exposure. Food factories consume large amounts of energy, while many snack products rely on complex packaging linked to petrochemical supply chains.
Recent history shows how quickly these pressures can converge. Russia’s invasion of Ukraine shook grain and fertiliser markets, while the pandemic exposed weaknesses in global shipping networks. The difference today is that manufacturers have already spent years cutting costs and adjusting supply chains.
If energy prices, fertiliser costs and freight rates all rise at the same time, the pressure on margins could build quickly. And if that happens, the next shock to the snack aisle may begin far from the supermarket. It may begin in the Gulf.
Three signals food manufacturers are watching
Energy prices: Ovens, fryers and drying systems make bakery, snack and cereal plants heavy energy users.
Fertiliser markets: Rising ammonia and urea prices can signal pressure building in grain and oilseed production.
Shipping routes: Particularly the Strait of Hormuz, where disruption could increase freight costs and slow deliveries of ingredients and packaging.
These indicators often move months before higher costs reach finished food products.
