Experts: Iran war price effects to linger after conflict ends
11 reported
A tentative deal to end the Iran war has raised questions about when prices for gasoline, groceries, airline tickets and other items will drop, but economists and industry analysts say consumers should not expect immediate relief. Fighting over the Strait of Hormuz disrupted supplies of crude oil, refined fuel, fertilizer, food, and footwear, and businesses expect higher costs to linger. Oil prices fell Monday to about $80 per barrel for U.S. benchmark crude, compared to $67 before the war and over $120 during the conflict. Refineries typically pay for crude a month or more in advance, so cheaper oil will not immediately reach consumers. Airline fuel surcharges may be one of the first areas where passengers see a reprieve, but experts say airfares are unlikely to drop this summer. Grocery prices are expected to rise 3.2% this year in the U.S., above the historical average of 2.6%, according to the U.S. Department of Agriculture.
What’s reported
A tentative deal to end the Iran war has been reached, but experts say price drops will not be immediate.
Oil prices fell Monday to about $80 per barrel for U.S. benchmark crude, from $67 before the war and over $120 during the conflict.
Refineries typically pay for crude oil a month or more in advance, delaying price drops at the pump.
In some Asian and African countries reliant on Middle East oil, the supply shock led to school and government office closures, per the International Energy Agency.
Airlines typically buy fuel in advance and price tickets based on demand, so lower jet fuel prices can take weeks or months to affect fares.
Fuel accounts for roughly 15% to 30% of the total cost of food, according to the Independent Grocers Alliance.
U.S. grocery prices are expected to rise 3.2% this year, compared to a historical average of 2.6%, per the U.S. Department of Agriculture.
Roughly 30% of the world’s fertilizer passed through the Strait of Hormuz before the war, and shipments will take time to return to pre-war levels.
The World Food Program expects a "devastating impact" on crop yields for months to come due to fertilizer and fuel shortages.
Footwear prices in May were 5.2% higher than the same month a year earlier, according to government figures.
The Strait of Hormuz closure affected about 2% to 3% of total container ship volume, per Freightos head of research Judah Levine.
Key figures
Brett House, economist and professor at Columbia Business School
Michael Lynch, distinguished fellow at the Energy Policy Research Foundation
Mark Barteau, professor of chemical engineering and chemistry at Texas A&M University
Gordon Ho, professor at the University of Southern California’s business school
David Ortega, professor of food economics and policy at Michigan State University
Andy Polk, senior vice president of the Footwear Distributors and Retailers of America
Judah Levine, head of research at Freightos
Josh Steinitz, chief strategy officer of ShipStation Global
Sources: abcnews.com
