U.S.-Iran conflict puts food prices at growing risk
Cost pressures are mounting throughout the agricultural supply chain, laying the groundwork for higher food prices in the months ahead.
For American farmers, diesel prices have risen 46% since the war began, while urea prices have climbed 47%, the Farm Bureau reported.
Those increases collided with the spring planting season, the narrow window when growers buy the bulk of their inputs for the entire crop year.
The U.S. Department of Agriculture has raised its food-at-home inflation forecast since January, moving the projection from 2.5% to 2.8% for 2026, following a peak of 3.2% in May.
Fertilizer shortages strain farmers during planting season
Roughly 30% of internationally traded fertilizers pass through the Strait of Hormuz, making the waterway a critical chokepoint for global agriculture.
After Iranian forces effectively closed the Strait in early March, global urea prices approximately doubled through April, and DAP prices rose about 35%, the International Food Policy Research Institute reported.
The timing was particularly unfortunate for American growers entering their most intensive planting period of the year.
In a nationwide survey of more than 5,700 farmers, the American Farm Bureau Federation found that 70% of farmers could not afford the fertilizer they needed.
For corn and wheat growers, fertilizer represents between one-third and one-half of total operating costs, data from the USDA's Economic Research Service confirmed.
Agriculture Secretary Brooke Rollins noted that about 80% of farmers secured their fertilizer by purchasing it last fall, before the conflict started.
The remaining 20% of producers, however, are purchasing inputs at sharply elevated prices that will flow directly into the cost of this year's harvest.
Disruptions to shipping routes and energy markets transmit rapidly into food production because fertilizer connects the two systems at every level, Hunter Swisher, chief executive of agricultural technology firm Phospholutions, told Yahoo Finance.
Record diesel costs compound the strain on food production
Diesel fuel powers nearly every stage of the food supply chain, from tractors and combines on the farm to the refrigerated trucks delivering produce across the country.
In Illinois, the nation's top soybean-producing state, farm diesel averaged a record $5.41 per gallon for the week ending May 1, according to the USDA Agricultural Marketing Service Illinois Production Cost Report.
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Nationally, diesel averaged $5.43 per gallon on April 1, a 50% increase over the same period in 2025, according to AAA data compiled by SmartAsset.
Fossil fuels used in farming and distribution account for between 15% and 30% of the cost of produce at the retail level, Jeffrey Dorfman, the Hugh C. Kiger Distinguished Professor of Agricultural and Resource Economics at North Carolina State University, told Fortune.
About two-thirds of farmers surveyed by Purdue University and CME Group said they expect their farm income to decline in 2026 due to the Iran war.
The jump in fuel was particularly frustrating because diesel was one of the few operating costs that growers had expected to decline this year, Claims Journal reported.
USDA forecasts signal sustained grocery inflation through 2026
The USDA's Economic Research Service revised its outlook for grocery inflation upward through May before easing it slightly in June as the conflict persisted through the first half of 2026.
By May, that projection had jumped to 3.2%, the highest level since the agency began issuing its 2026 estimates in mid-2025.
The most recent June update brought the figure down slightly to 2.8%, but that number still exceeds the long-term average by a notable margin, the USDA reported.
Ricky Volpe, professor of agribusiness at California Polytechnic State University and former USDA Economic Research Service economist, said in an FMI-The Food Industry Association briefing that even an immediate resolution to the conflict would not prevent grocery inflation from climbing well above the historical average for the remainder of 2026.
Unfortunately, my view is that even if the conflict were going to be resolved today, full withdrawal and the Strait of Hormuz opens, we're going to be seeing some of these impacts filtering into the food system well into late summer and the fall.
Selected food categories show how conflict-driven input costs pass through the supply chain before reaching retail prices each week.
The USDA projects beef and veal prices to climb 7.5% this year, while fresh vegetables are expected to rise 7.7%, the USDA confirmed.
Agricultural lender Rabobank projects mid-single-digit food inflation over the next 12 to 18 months as energy-linked costs continue filtering through to consumers, Claims Journal noted.
The cost increases may outlast the conflict itself
Even if a lasting peace agreement takes hold, the elevated costs already woven into the food supply chain will take months to fully work through.
Cost shocks typically need three to six months to reach grocery shelves, according to Purdue University's Center for Commercial Agriculture, and once retail prices absorb those increases, they tend to stick.
"All the stuff being manufactured today is at that higher-cost space, and it's just going to get passed on in the inventory that gets sold down the channel," said Wesley Davis, chief agriculture economist at Meridian Ag Advisors, as Claims Journal reported.
Historical patterns reinforce that concern for consumers who expect prices to snap back once the conflict's immediate disruptions ease from the headlines.
New analysis from the Energy and Climate Intelligence Unit found that food prices pushed higher by geopolitical shocks tend to remain elevated well beyond the underlying disruption.
Related: BEA warns Americans on key inflation, consumer spending
