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Introduction: Wheat price heading for biggest jump in two months
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
A jump in the wheat price is adding to concern that the conflict in the Middle East will fuel food inflation this year.
Chicago wheat futures are up almost 4.5% this week, heading for their biggest weekly jump since February. Concerns about dry weather in the US, and the Iran war, are both factors.
The jump in fertiliser and diesel prices since the war began at the end of February have hit farmers’ costs, and could lead to lower harvest levels – especially as traffic through the strait of Hormuz remains largely blocked.
A new report from humanitarian group Mercy Corps this week has highlighted that disruptions to fuel, fertiliser, and shipping have rapidly transmitted to import-dependent economies, affecting planting seasons now underway in Somalia, Ethiopia, and Pakistan.
Food insecurity outcomes for 2026 and 2027 are now “locked in” for some of the world’s most fragile countries, Mercy Corps warns.
Its research shows:
-
Global fertiliser prices have surged during critical planting periods.
-
Fuel prices rose as much as 150% within days in some markets, driving up transport and water costs.
-
Commercial shipping through the Strait of Hormuz fell by more than 90%, constraining agricultural supply chains.
-
In Somalia, fuel spikes have doubled the cost of water in drought-affected areas.
-
Humanitarian shipments to Sudan are being rerouted via the Cape of Good Hope, adding roughly 6,000 miles and up to three weeks to transit times.
-
The World Food Programme estimates 45 million additional people could be pushed into acute hunger globally.
That comes as dry conditions in the US Plains threaten to curb wheat yields there. Data last week showed that more than half of the US is in drought, following low rainfall.
Dry weather in Australia, and the Black Sea growing region, are also hurting wheat yields there.
The agenda
-
10am BST: Eurozone trade data for February
-
1.30pm BST: IMF: Europe Department press briefing
-
6pm BST: Baker Hughes count of US oil rigs
Key events
IMF: We were going to upgrade Europe’s growth forecast, before Iran war
The Iran war has crushed hopes that European growth would pick up this year.
Alfred Kammer, director of the IMF’s European Department, is briefing the media in Washington DC now.
Outlining the outlook for Europe’s economy, Kammer says:
We were ready for an upgrade on growth. And then, the war in the Middle East happened, and we now have a downgrade on growth and upgrade on our inflation forecast.
The Fund’s “reference scenario” is that the Iran war will shave 0.5% off euro area growth over the next two years.
In a more severe scenario, up to 1.7 percentage points could be cut off European GDP, he adds.
Britain’s energy price cap forecast to rise 12% this summer
The jump in energy prices since the Iran war started is expected to push British energy bills higher this summer, but not by as much as previously feared.
Consultancy Cornwall Insight is now predicting that the energy price cap will rise by 12% in July, to £1,837 per year for a typical dual fuel consumer in Great Britain.
That’s lower than a few weeks ago – at the end of March, Cornwall forecast the cap would rise to £1,929 per year.
Since then, oil and gas prices have dropped, on hopes of a peace deal in the Middle East.
Jet fuel shortage could lead to flight cancellations in Europe, IATA says
Fears are growing that European airlines could start cancelling flights this summer unless supplies of jet fuel pick up back to pre-Iran war levels.
The International Air Transport Association’s director general Willie Walsh has suggested today that flights in Europe could be cancelled due to a lack of jet fuel starting from the end of May.
Walshe said:
“Along with doing everything possible to secure alternative supply lines, it’s important that authorities have well-communicated and well-coordinated plans in place in case rationing becomes necessary, including for slot relief.”
[’Slot relief’ would mean airlines wouldn’t lose their landing slot at an airport if they cancelled flights due to fuel shortages].
Yesterday the head of the International Energy Agency warned that Europe has only six weeks of jet fuel left before shortages will hit.
The drop in motor fuel prices, and in mortgage rates, today will provide a little help to UK families facing a cost-of-living squeeze.
New data from the Office for National Statistics has found that two-thirds (67%) of adults reported that their cost of living had increased compared with a month ago, up from 56% in February 2026.
The ONS says:
Among those reporting that their cost of living had increased compared with a month ago, the price of food shopping remained the most commonly reported reason (91%); the proportion reporting the price of fuel (75%) as a reason for increased living costs increased from February 2026, when it was 38%.
RAC: fuel prices start to drop
There is finally some relief for motorists at the pumps, after weeks of rising prices.
Petrol and diesel prices dropped yesterday for the first time since the Iran war started, and are a little lower today too.
This has pulled petrol to just below 158p a litre on average. However, that’s still 19% higher than before the conflict began, when a litre of petrol cost 132.83p.
The average cost of diesel has slipped to 190.94p – still 48% higher than at the end of February.
This follows a drop in wholesale fuel costs earlier this week.
RAC head of policy Simon Williams says:
“After 46 days of rising prices, the cost of both petrol and diesel across the country has finally begun to drop very slightly. Wholesale prices are still lower, so we’re hopeful there will be further reductions amounting to several pence a litre in the coming days.
After record rises, drivers will be relieved to finally see prices going the other way. While we’re a long way from a return to the prices we had at the start of the conflict, there’s now a glimmer of light at the end of the tunnel.”
Key charts: How insolvencies rose in March
The conflict in Iran is already taking a toll on businesses and balance sheets across the UK, warns Matthew Richards, joint head of restructuring & insolvency at accountancy and business advisory group Azets:
Richards says an increasing number of directors are seeking advice about their finances as they fear they will not be able to survive the economic aftershocks of the war in Iran, adding:
Directors who were previously surviving have been concerned about the impact the war will have on their finances, and the increase in costs it caused has been the tipping point for many firms. The longer this carries on, the bigger impact it will have on margins, access to finance and affordability of funding, as well as consumer spending as households attempt to manage their own costs and cut back on anything that isn’t essential.
“With the war likely to continue, cost pressures continuing to be a problem and additional expenses like the new business rates and the changes to national minimum wage taking effect this month, it’s very likely demand for insolvency support will increase in the coming months.
Involvencies in England and Wales up 7% in March
The UK could be facing a “mountain” of insolvencies, restructuring experts are warning, as the Iran war drives up costs.
New data today shows a 7% rise in the number of company insolvencies in England and Wales in March – up to 2,022, from 1,895 in February.
The increase appears to be due to the collapse of mortgage lender Market Financial Solutions last month, whuch collapsed after borrowing £1.3bn from a string of financial companies.
The Insolvency Service says:
The increase in March 2026 was mostly driven by more than 100 connected companies in the Real Estate sector entering administration.
That may mean March’s rise in insolvencies is “a one-off event”, the Insolvency Servuce suggests.
But expers are warning that the geopolitical crisis in the Middle East and the growing tax burden on businesses risks driving more firms under.
Giuseppe Parla, restructuring & insolvency director at Menzies LLP, says:
“Ongoing tensions in the Middle East are driving up energy and fuel costs, disrupting supply chains, and keeping inflation stubbornly above the Bank of England’s 2% target. The UK economy is expected to be among the most exposed in the developed world – yet much of this impact has not yet filtered through to company balance sheets or the latest insolvency data.
“Compounding this, the new tax year has brought a fresh wave of cost pressures. While there have been no headline rate rises, frozen thresholds, reduced reliefs and tighter allowances are quietly intensifying ‘fiscal drag’ – steadily increasing the tax burden on both businesses and consumers. Together, these twin pressures are squeezing margins and suppressing demand which risks driving more businesses into the red.
“This combination means we are likely at the foot of a mountain of insolvencies, rather than sitting at its peak. With cost pressures still building, consumer demand under strain, and uncertainty persisting, insolvency numbers are likely to remain elevated, or rise further, in the months ahead, posing a serious threat to the wider British economy.”
UK mortgage rates drop a little
UK mortgage rates have dipped slightly today, as some lenders begin to cut their offerings.
Moneyfacts reports that the average 2-year fixed residential mortgage rate today is 5.87%, down from 5.88% on Thursday.
The average 5-year fixed residential mortgage rate today is 5.76%, down from 5.77% yesterday.
Santander and TSB, and the Coventry and Skipton building societies, have all said they are cutting the cost of some fixed-rate mortgages, after hopes of a Middle East peace deal pushed down their borrowing costs.
Oil is slightly lower today, but still quite close to the $100 a barrel mark.
Brent crude futures are down 0.75% at $98.70 a barrel, after Donald Trump told reporters last night:
“We’re going to see what happens. But I think we’re very close to making a deal with Iran.”
But even if a deal was reached immediately, it would take weeks for oil and gas supplies to return to normality.
Before the crisis began, oil was trading around $72 a barrel, and jumped to almost $120 during March.
Electricity producers’ shares fall as UK considers breaking pricing link with gas
Britain’s blue-chip share index has dropped slightly, pulled down by electricity producers.
The FTSE 100 share index is down 15 points, or 0.14%, at 10,577.
SSE (-4%) and Centrica (-3.5%) are leading the fallers, after the UK government indicated it is considering cutting the link between electricity and gas prices.
That link means that gas almost always sets the price of electricity under Britain’s marginal cost pricing model – meaning periods of high gas prices are painful for consumers (but lucrative for electricity producers).
Speaking in Washington yesterday, chancellor Rachel Reeves said she and energy secretary Ed Miliband were looking at the issue:
Reeves said:
“So, this is something that I’ve been attracted to for quite some time, delinking electricity and gas prices.
“At the moment, when gas prices are high, we end up paying more for our electricity, even though the cost of producing it doesn’t change.
“And so myself and Ed Miliband are now working to come up with a practical way that we can delink those prices.”
European stock markets have opened calmly, after a truce between Lebanon and Israel truce was announced yesterday.
With Donald Trump suggesting the next US-Iran meeting might take place over the weekend, hopes of de-escalation in the Middle East are lifting shares slightly.
While Gemany’s DAX is flat, France’s CAC 40 has gained 0.15% in early trading and Italy’s FTSE Mib index has risen by 0.25%.
This leaves the pan-European Stoxx 600 index on track to notch its fourth weekly gain in a row.
Derren Nathan, head of equity research at Hargreaves Lansdown, says:
Events in the Middle East remain the key market driver, and President Trump’s overnight comments on the potential for further peace talks between the US and Iran could boost equity markets today.
A ceasefire between Israel and Iranian proxy Hezbollah after Israeli/Lebanese talks in Washington provides further hope for de-escalation.
The jump in wheat prices comes as food inflation is already forecast to climb over the coming months.
Capital Economics predict UK food inflation could almost double by mid-2027, telling clients:
Outside of fuel and utilities, the prices of flights, other forms of transport, flowers and food are likely to rise the most in response to the Iran war. In our baseline scenario, food price inflation rises from 3.3% in February to 6.0% in the middle of next year.
Cuts to overseas aid will worsen shocks to global economy, David Miliband says
Richard Partington
Cuts to overseas aid by countries including the US and the UK risk stoking global economic instability amid the humanitarian crisis resulting from the Iran war, David Miliband has told my colleague Richard Partington.
The former British foreign secretary and head of the International Rescue Committee (IRC) said the US “abandoning” of its aid programme under Donald Trump would worsen shocks to the global economy that would impact poor and wealthy countries alike.
Miliband also said he regretted that Keir Starmer’s government was slashing the UK’s aid budget, because supporting the world’s poorest was morally the right thing to do and a “good investment for Britain”.
The former Labour minister said:
“An untended humanitarian crisis is an incubator of political instability. We are in a more connected world than ever before.
“The Iran war shows how connected we are, but the connections go the other way [from poor to rich countries], too.”
Here’s the full story:
Introduction: Wheat price heading for biggest jump in two months
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
A jump in the wheat price is adding to concern that the conflict in the Middle East will fuel food inflation this year.
Chicago wheat futures are up almost 4.5% this week, heading for their biggest weekly jump since February. Concerns about dry weather in the US, and the Iran war, are both factors.
The jump in fertiliser and diesel prices since the war began at the end of February have hit farmers’ costs, and could lead to lower harvest levels – especially as traffic through the strait of Hormuz remains largely blocked.
A new report from humanitarian group Mercy Corps this week has highlighted that disruptions to fuel, fertiliser, and shipping have rapidly transmitted to import-dependent economies, affecting planting seasons now underway in Somalia, Ethiopia, and Pakistan.
Food insecurity outcomes for 2026 and 2027 are now “locked in” for some of the world’s most fragile countries, Mercy Corps warns.
Its research shows:
-
Global fertiliser prices have surged during critical planting periods.
-
Fuel prices rose as much as 150% within days in some markets, driving up transport and water costs.
-
Commercial shipping through the Strait of Hormuz fell by more than 90%, constraining agricultural supply chains.
-
In Somalia, fuel spikes have doubled the cost of water in drought-affected areas.
-
Humanitarian shipments to Sudan are being rerouted via the Cape of Good Hope, adding roughly 6,000 miles and up to three weeks to transit times.
-
The World Food Programme estimates 45 million additional people could be pushed into acute hunger globally.
That comes as dry conditions in the US Plains threaten to curb wheat yields there. Data last week showed that more than half of the US is in drought, following low rainfall.
Dry weather in Australia, and the Black Sea growing region, are also hurting wheat yields there.
The agenda
-
10am BST: Eurozone trade data for February
-
1.30pm BST: IMF: Europe Department press briefing
-
6pm BST: Baker Hughes count of US oil rigs
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