APPLETON, Wis. — The United States and Iran have reportedly reached a tentative agreement to fully reopen the Strait of Hormuz, the vital waterway that has been closed for more than a month amid escalating conflict, potentially averting broader disruptions to global trade. The deal, announced on Friday, comes as a ceasefire takes hold, though officials on both sides emphasized that a permanent peace accord remains elusive. For American consumers bracing for higher costs at the grocery store, the news offers a measure of relief, but experts caution that the war's ripple effects on food prices could still emerge in the coming months.
The Strait of Hormuz, a narrow passage off the coast of Iran connecting the Persian Gulf to the Arabian Sea, serves as a chokepoint for roughly 20 percent of the world's oil supply. Its closure in early March, triggered by military actions in the ongoing U.S.-Iran conflict, sent energy markets into turmoil. Gasoline prices surged by as much as 30 percent in some U.S. regions, diesel costs climbed, and commodities like fertilizers and plastics saw sharp increases. These developments raised alarms about secondary impacts on everyday essentials, including food, as higher energy expenses filter through supply chains.
Despite these pressures, March's Consumer Price Index data, released by the U.S. Bureau of Labor Statistics, showed no increase in food prices compared to February. Grocery shoppers across the country, from Appleton to Los Angeles, have not yet felt the pinch at checkout lines. The stability comes amid reports of the Strait's impending reopening, which could normalize shipping routes and ease some of the immediate strains on global energy flows.
To understand why food prices have held steady so far and what might lie ahead, The Appleton Times spoke with Ken Foster, an agricultural economist at Purdue University in West Lafayette, Indiana. Foster, who has studied commodity markets for decades, explained the delays in how energy shocks propagate through the food sector. "It takes time for an energy shock to work its way through the supply chain," Foster said. "Many oil and gas shipments that left the Strait of Hormuz at the start of this conflict just recently reached the ports that they were headed for."
Foster highlighted how pre-existing contracts are buffering consumers for now. Food producers, he noted, often lock in energy costs months in advance. For instance, diesel fuel used in trains and trucks for transporting goods across the U.S. is typically purchased under fixed-price agreements from before the war began. "Most of that diesel is pre-priced," Foster added. "So the impact of rising diesel costs may not work its way into that part of the supply chain for weeks."
Intermediaries in the supply chain, such as manufacturers and wholesalers, are also playing a role in dampening immediate effects. These businesses are absorbing higher costs where possible to maintain competitive pricing. "They can’t absorb it forever, but they’ll try for a while," Foster said. Retailers, facing stiff competition, are similarly reluctant to raise shelf prices abruptly, fearing loss of market share.
Early indicators, however, suggest the energy crunch is beginning to infiltrate food production. The Producer Price Index report for March, issued this week by the Labor Department, revealed rising costs at the initial stages of the food supply chain. Prices at Stage 1 — the segment closest to farmers — were 6.2 percent higher than in March 2023 and 2.4 percent above February levels. The data, collected on March 10, captured just 10 days into the Strait's closure, so Foster urged caution in interpreting it as a definitive trend. "I’d be careful reading too much into those numbers," he said.
Looking forward, the sustainability of the reopening deal will be crucial. If shipping through the Strait returns to normal, Foster believes significant food price hikes can be avoided. "At this point, I would avoid using the word ‘substantial,’" he remarked. "If we see a return to something approaching normal shipping through the Strait, then we probably will avoid big shifts in food prices."
Should the conflict drag on, however, other factors could amplify pressures. Fertilizer, a key input for agriculture, relies heavily on natural gas derived from global energy markets. In North America, farmers secured supplies for the 2026 growing season prior to the war's outbreak, shielding this year's crops from immediate spikes. But as planning begins for 2027, prolonged disruptions could drive up costs substantially. "If the war starts edging into the 2027 crop year, then the impact of fertilizer kicks in and food inflation compounds," Foster explained.
Beyond fertilizers, energy influences a wide array of food-related expenses. Manufacturing processes, transportation logistics, and even infrastructure maintenance all draw on higher fuel prices. Packaging, often overlooked, represents another vulnerability. Modern food wrappers — plastics, foams, and other materials — are energy-intensive to produce. "There’s a lot of plastics, a lot of foams. They’re very energy-intensive," Foster said. "And that’s where we’re going to see pressure in the next three to 12 months, if the conflict continues."
Determining a precise timeline for when these costs might become unavoidable for consumers is challenging. Foster demurred on pinpointing an "inflection point," noting the unpredictability of geopolitical events. "If I could answer questions like that, I would’ve retired a long time ago," he quipped. "All I can say is that the longer the conflict lasts, the more difficult it is for distributors and processors to absorb this into their margins and not pass it fully on to consumers."
This crisis differs from typical agricultural disruptions like droughts or crop failures, which often affect specific regions or commodities. In those cases, consumers can pivot — opting for chicken over pricier beef, for example. An energy shock, by contrast, permeates the entire food economy. "There’s nowhere to hide," Foster observed. "It passes through to the whole food economy."
Historical parallels offer some guidance, though none match perfectly. The 2022 Russian invasion of Ukraine strained energy and fertilizer supplies while directly hitting grain exports from the Black Sea region. That event contributed to global food inflation peaking at 14.3 percent in early 2023, according to United Nations data. The current Middle East conflict, however, does not involve major food-exporting nations like Ukraine or Russia. Still, the scale of the energy disruption here exceeds the Ukraine crisis, with oil prices briefly topping $100 per barrel in late March.
Even if prices do rise, relief may not come swiftly once the war ends. Food inflation tends to build gradually but recede even more slowly, driven by market psychology. Producers and retailers exhibit "risk aversion," Foster said, avoiding aggressive price cuts to prevent losses if costs rebound. "Historically, we’ve seen that food prices are slow to rise in cases like this, but even slower to taper off on the other end," he noted. "Often, prices don’t decline at all; they just stop growing as fast. So, if we do see food inflation spike, consumers could feel the consequences long after the shock is over."
As negotiations between the U.S. and Iran continue in undisclosed locations, possibly in Oman or Switzerland, the focus remains on solidifying the ceasefire. U.S. State Department officials have not commented on the food price implications but stressed the urgency of restoring maritime access. Iranian state media, meanwhile, portrayed the deal as a concession to Western aggression, without addressing economic fallout. For families in Appleton and beyond, the coming weeks will test whether Friday's agreement marks a turning point or merely a pause in the war's economic toll.