Energy shock widens to food costs

The International Monetary Fund says the Middle East war has turned an energy jolt into a broader inflation risk, cutting its 2026 global growth forecast to 3.1%. (imf.org) In its April 14 World Economic Outlook, the fund said global growth would slow to 3.1% in 2026 and 3.2% in 2027 if the conflict stays limited in duration and scope. It also said global headline inflation would rise modestly in 2026 before easing again in 2027. (imf.org) Pierre-Olivier Gourinchas, the International Monetary Fund’s chief economist, wrote that the fund’s pre-conflict forecast for 2026 had been 3.4%. He said the reference forecast now assumes a 19% increase in energy commodity prices in 2026. (imf.org) The fund tied the shock to the Strait of Hormuz, saying a closure and damage to critical facilities in a region central to hydrocarbon supply raised the prospect of a major energy crisis. In its adverse scenario, global growth falls to 2.5% and inflation rises to 5.4% this year. (imf.org) Energy prices hit food through fertiliser first. The World Bank says natural gas is a key input for nitrogen fertiliser production, so gas-price swings feed directly into ammonia and urea costs paid by farmers. (worldbank.org) That pass-through is already showing up in food benchmarks. The Food and Agriculture Organization said its Food Price Index averaged 128.5 points in March 2026, up 2.4% from February, with higher energy prices linked to the Near East conflict helping lift cereals, meat, dairy, vegetable oils and sugar. (fao.org) The Food and Agriculture Organization said March marked the second straight monthly increase in world food prices. It also said the index was still 19.8% below its March 2022 peak, showing this is a renewed climb rather than a return to the last food-price spike. (fao.org) Restaurants and other hospitality operators are exposed on both sides of the bill: utilities rise with energy markets, and imported food costs rise as suppliers pay more for fuel, fertiliser and freight. The National Restaurant Association said operators entered 2026 facing elevated food and labor costs and ongoing supply-chain pressure. (restaurant.org) In the United States, the Department of Agriculture said food-away-from-home prices in February 2026 were 3.9% higher than a year earlier. That category covers restaurant and other foodservice purchases, the part of inflation diners see directly on menus. (ers.usda.gov) The International Monetary Fund’s baseline still assumes the conflict is short-lived. Its warning is that if energy shipments stay disrupted, the shock will not stop at oil tanks and gas terminals; it will keep moving through fertiliser plants, farm costs and restaurant bills. (imf.org)