How higher oil prices translate to the grocery store
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The sharp spike in gas and oil prices caused by the Iran war will likely lead to a further rise in food prices in the coming weeks, economists and agricultural experts tell Axios.
Why it matters: The war is just the latest stress driving up food inflation — on top of tariffs, rising electricity prices and an immigration crackdown that has driven up labor costs.
- "In the domain of food prices, the war is a problem because of what's preceded it in the U.S.," says Chris Barrett, an economist and professor of agriculture at Cornell University.
The big picture: When people, particularly lower earners, spend more on food, they cut back on other things.
- Those kind of shifts could be a drag on the economy and company earnings as well.
How it works: The immediate shock on the grocery shelf comes via higher costs of transportation — literally getting food from warehouses and farms to the store.
- Meanwhile, a lot of critical fertilizer is shipped through the Strait of Hormuz, and prices for that input are rising. Those costs will take more time to filter down to food prices, and whether or not that happens depends on the war's duration.
By the numbers: The price of food at home was already up 3% in February from the year before, per the Consumer Price Index.
- The share of Americans who said grocery prices at the store were higher than they expected in March jumped to 48%, from 46% in February before the war started, according to Morning Consult polling shared with Axios.
- Yes, but: It's the sharp rise in gas prices that really got people's attention — 55% reported higher-than-expected prices at the pump in March, from 38% in February, they found.
Zoom out: Grocery price increases will be more of a slow burn, as there are more inputs involved. First, prices are impacted by transportation expenses, then the costs of producing and packaging food, and then, finally, the fertilizer and farmer impacts.
- "It won't happen as instantly, as with gas," says Sofia Baig, a senior economist at Morning Consult.
Between the lines: Food prices are arguably even more salient to Americans than the prices they see at the pump.
- Americans spend, on average, about 10% of their disposable income on food — twice what they spend on gas. And, obviously, not everyone drives — yet we all must eat.
Follow the money: "People hate when grocery prices are really expensive," Baig says. "We find that across our polling, no matter how we ask it."
- Concerns over grocery prices topped the list of consumer concerns in Morning Consult polling in 2025, 2024 and 2023 — beating out housing or inflation generally.
Friction point: An acceleration of already high food inflation would be yet another hit to President Trump's approval ratings.
What to watch: We'll get a fresh CPI report on Friday that will reflect the first month of the war.
- "The impact of the largest energy supply shock since the 1970s will certainly be on full display," Deutsche Bank analysts wrote in a note last week, saying that they expect a 25% increase in gasoline prices to put upward pressure on inflation overall.
The bottom line: "A lot of us had hoped we'd see food inflation decline this year," says Joseph Glauber, emeritus fellow at the International Food Policy Research Institute.
- Instead, he said, elevated food inflation appears to be with us for a while.
