7 ways the war can affect fuel, food and monthly expenses

Vijay Valecha, March 25, Gulf News

Dubai: The impact of the Middle East conflict is moving steadily from global markets into household budgets, with early signs already visible in fuel and transport. Pressure is expected to build in stages, spreading across food, goods and services if disruptions persist.

The Strait of Hormuz sits at the centre of this shift. It carries a large share of global oil and trade flows, and any slowdown quickly feeds into prices that consumers eventually pay.

1. Fuel and transport costs rise first

Global energy markets respond immediately to disruptions, pushing up crude prices and freight rates. This is the first and most visible channel for households.

Vijay Valecha, Chief Investment Officer at Century Financial, said households tend to feel this within a short window.

“This is the channel that hits wallets first, within days to two weeks.”

Higher petrol prices, ride-hailing fares and delivery charges are typically the earliest signs.

2. Delivery and logistics costs climb

Shipping disruptions are tightening capacity across key routes. Fewer vessels are willing to pass through risk zones, while insurance costs have surged.

War-risk premiums and freight rates have jumped sharply, increasing the cost of moving goods into the region. These higher logistics costs are passed through quickly, showing up in delivery fees and overall pricing across sectors.

3. Grocery prices rise with a lag

Food inflation follows a slower but more sustained path. The UAE imports a large share of its food, making it sensitive to shipping delays and rising freight costs.

Valecha said the timing tends to unfold over weeks. “Freight disruptions usually take about 10–14 days to show up at ports. However, the real impact on prices in stores comes later. It usually takes 2–5 weeks for shelf prices to rise.”

Fresh produce, dairy and air-freighted items tend to react first, followed by broader food categories.

Even with these pressures building, the UAE remains relatively insulated. Abdulla bin Touq Al Marri, Minister of Economy and Tourism and Chairman of the Supreme Committee for Consumer Protection, said the UAE’s food security framework is built on more than local reserves, supported by a broad network of global trade ties that allows access to alternative food sources when supply chains face disruption.

4. Fertiliser shock feeds into food costs

The impact on agriculture adds another layer. Fertiliser and petrochemical supply chains are closely tied to energy markets, and disruptions are already pushing costs higher.

Rising fertiliser prices increase production costs for farmers globally, which eventually feeds into higher food prices. This effect tends to arrive later but can persist longer.

Surging freight and shipping insurance costs will push up prices across non-energy goods, from electronics to clothing. For an average household, the combined effect of higher fuel, food and goods costs could mean a squeeze on disposable income, with the biggest burden falling on lower- and middle-income families who spend the largest share of their earnings on these essentials.

5. Everyday goods become more expensive

Higher shipping and insurance costs are also pushing up prices for non-food items such as electronics, clothing and household goods.

“When shipping insurance costs surge, these increases cascade through the supply chain. Imported groceries, packaged foods, and even e-commerce delivery absorb higher transportation and storage costs.”

This phase takes longer to materialise but tends to be more persistent as new stock arrives at higher costs.

6. Services start adjusting prices

Once businesses face higher input costs, those increases begin to flow into services. Restaurants, personal care providers and other service sectors gradually adjust pricing to reflect higher operating expenses.

This stage typically lags behind goods inflation but tends to last longer, keeping overall living costs elevated.

7. Borrowing and household bills stay higher

The final layer comes through inflation and interest rates. Rising energy costs can keep inflation elevated, influencing monetary policy and borrowing costs.

Valecha said this could extend the pressure on households.

“A higher-for-longer rate environment increases the burden of mortgages and personal loans.”

This phase affects monthly budgets more broadly, from loan repayments to utility bills, and tends to persist even after initial shocks ease.

The UAE’s diversified supply chains and strong logistics infrastructure provide an important cushion in the early stages. Strategic reserves and alternative sourcing routes can absorb short-term disruptions and prevent immediate shortages.

Still, these measures mainly delay the transmission of costs. If tensions persist and shipping flows remain constrained, the pressure is likely to spread further across household spending, tightening disposable income over time.

Source

Gulf News