Food inflation is finally slowing. So why could your supermarket bill start rising again?

Food inflation in Europe is easing, but the recent oil and fertiliser shock could still push up supermarket prices with a delay of more than a year, while this summer's extreme weather is likely to be a bigger driver of eurozone food inflation next year than the Iran war, according to economists. Food inflation has been slowing in the eurozone, despite expectations that higher energy and fertiliser costs following the Iran war would push prices higher. However, economists at Oxford Economics and Deutsche Bank expect food price inflation to pick up again next year as higher commodity prices feed through the food supply chain and this summer's extreme weather damages crops across Europe. Economists say food prices typically respond with a delay because higher energy and fertiliser costs are first absorbed by farmers before being passed on to processors, wholesalers and eventually supermarkets. Oxford Economics expects eurozone food inflation to rise to around 3% in 2027, from 1.6% in June this year. It estimates that the weather effect alone could add up to one percentage point to food inflation next year. Oxford economists expect food inflation to remain below the ECB's forecast of 2.6% this year, staying below 2% throughout the rest of 2026 before rising in 2027. "The fertiliser shortage due to the Strait of Hormuz blockade and the surge in prices has been less severe than anticipated, but it will impact farm yields," said Senior Economist Tomas Dvorak and Lead Economist Ricardo Amaro. Economists at Deutsche Bank found that, despite oil and fertiliser prices falling back from their peaks, the March-June commodity shock could still lift food prices by around 1.3% in the UK and 0.8% in the euro area over the next year. That would add roughly 0.1 to 0.15 percentage points to overall inflation. Oxford Economics estimates the recent commodity shock alone could add around 0.5 percentage points to eurozone food inflation over the next 12 months, with unprocessed food likely to be affected sooner than processed products. It estimates this summer's heatwaves could add up to another one percentage point next year. Before the Iran war, the spot price for the international benchmark Brent crude oil was trading at about $72.50 a barrel. Due to disruptions in supply during the conflict, prices spiked to $118 a barrel before falling back to around $83 a barrel after the ceasefire. Deutsche Bank expects prices to decline gradually over the next few months, based on futures markets. However, a renewed conflict could change that outlook. At the same time, one of the most widely used nitrogen fertilisers, urea, also saw its spot price increase sharply at the beginning of the Iran war before falling back. Recent retail food prices have yet to reflect these swings. However, economists at the bank caution that while oil and fertiliser prices have fallen from their peaks, renewed tensions in the Middle East have pushed energy prices higher again, raising the risk of further inflationary pressure. Higher energy and fertiliser costs feed into food prices through two main channels. First, energy is used across the food supply chain — from tractors and transport to processing, packaging and refrigeration — making production more expensive. Second, fertiliser prices rise with natural gas costs, increasing farmers' expenses. These costs take time to reach supermarket shelves: energy prices can affect fertiliser within weeks, but lower fertiliser use or changes in crop planting typically push up food prices only after the next harvest. Current food prices Eurozone food inflation has declined from 2.5% year on year in December 2025 to 1.6% in June 2026, according to Eurostat's flash estimate. This marks the lowest reading for harmonised food inflation since mid-2021. Leading indicators suggest food price inflation could remain subdued for the rest of the year. Lower food prices have been supported by a strong grain harvest in 2025 and an oversupply of raw milk, which has reduced dairy prices. Earlier global shocks have also eased, with chocolate, cocoa and coffee prices stabilising after surging in 2025. Meanwhile, olive oil prices continue to fall after their record highs in 2022, while lower energy costs have reduced food processing costs. Oxford Economics expects these factors to continue supporting lower food inflation in the coming months. Deutsche Bank also notes that dairy products, sugar and sweets, and coffee were among the biggest contributors to food inflation in 2025, but their contribution has since declined. Meat prices, although easing from last year's peak, remain the largest contributor to food inflation. Almost half of food items have become cheaper over the past three months, while only around 20% recorded price rises above 2%, pointing to weak food inflation in the months ahead, according to Oxford Economics. Global food and fertiliser prices typically take about a year to feed through to supermarket shelves. For now, they have largely stabilised, while farmgate and wholesale prices continue to point to subdued food inflation. Oxford Economics has lowered its forecast for food, alcohol and tobacco inflation to 2.1% in 2026. "But we think food price inflation is still poised to accelerate, just with a longer lag than we previously assumed," the report says. This year's heatwaves make next year's food more expensive Oxford Economics expects food prices to accelerate in 2027 as higher energy, processing and packaging costs feed through the supply chain. It estimates these factors could add 0.5 to 0.7 percentage points to food inflation, with unprocessed food likely to respond faster than processed products. This year's extreme heat across the continent could have an even bigger impact. "We think this summer's heatwaves will be a stronger upward driver of food prices next year than the war," the economists write. This summer's heatwaves and unusually warm, dry conditions could have a greater impact on food prices than the commodity shock itself. Damage to crops is already considered unavoidable, while further heatwaves could reduce harvests further, pushing food inflation higher in 2027. A strong El Niño-Southern Oscillation (ENSO) could also be intensifying extreme weather, increasing the risk of further disruption. "The adverse weather impact could build further due to the particularly strong El Niño this year. We estimate it will add up to 1 percentage point to food inflation next year, and we will raise our 2027 forecast to around 3%," Oxford Economics said. The expected jump in prices is forecast to appear in the first half of 2027 before easing gradually in the second half of the year. Long-term cost of heatwaves Oxford Economics refers to a 2023 ECB working paper that found rising temperatures keep pushing food prices and overall inflation higher over time, with the strongest effect on food. It also found that higher temperatures can continue to affect inflation for up to 12 months after the initial weather shock. The ECB working paper estimates that, by 2035, global warming could raise global average annual food inflation by 0.92 to 3.23 percentage points, depending on the climate scenario. It also found that Europe's 2022 heatwave raised European food inflation by 0.67 percentage points and eurozone food inflation by 0.78 percentage points, with the largest effects in southern Europe. But future heatwaves could have an even bigger impact on food prices. Under continued warming, the inflationary impact of extreme summers is expected to increase. The ECB estimates that if a heatwave similar to the one in 2022 occurred under 2035 climate conditions, it would raise European food inflation by around one percentage point, compared with 0.67 percentage points today. The researchers argue that as the climate warms, crops become more vulnerable to heat stress, meaning the same heatwave is likely to cause greater harvest losses and stronger food price pressures.