Economist says food prices likely to increase as result of Middle East conflict

By Sheria Brathwaite

Economist Jeremy Stephen is cautioning consumers to brace for further price hikes as the Middle East conflict continues to unfold. 

He predicts that not only will the price of oil surge, but the cost of commodities will also follow suit.

“As this war drags out, it will make [things] very expensive over time,” he said in an interview with Barbados TODAY on Wednesday.

In the region’s largest military conflict since 1967, the Palestinian militant group Hamas launched an unprecedented attack on Israel on October 7, with its fighters entering communities near the Gaza Strip, killing as many as 1 200 Israelis, and taking dozens of hostages. In retaliation, Israel has announced a “siege” of Gaza, cutting its supplies of electricity, fuel, food, goods and water.

Stephen said: “The situation in Israel and Hamas, at the epicentre of the Middle East, is likely to have a profound impact on oil prices. Expect not only price volatility but a consistent upward trend.”

Neither Israel nor the Palestinian-occupied territory of Gaza are oil-producing nations nor do they control the flow of oil out of the region. 

However, Hamas’ surprise attack ignited a surge in the global benchmark oil price, which rose by almost US$4 a barrel, or more than 4 per cent, to US$88 on trader speculation that a wider escalation of the conflict across the Middle East could disrupt supplies.

Stephen explained that food prices tend to rise when oil prices increase, affecting imports and trade routes to Barbados. He warned of potential food supply disruptions, inflation, and logistical challenges.

“You should expect prices of goods to go up as well; it’s just a matter of when. Oil, as you would know, powers the ships that bring food. That channel where Israel is, Saudi Arabia and all of them, is a major passthrough point for many of the world shipments. A lot of imports that we get in Barbados are out of Turkey, for example, and [the war] is pretty close to Turkey in terms of the shipping routes. 

“So you should expect a disruption in food supplies, especially for imports into the Caribbean. And it would affect general inflation because of the pricing effects of oil, and also maybe there will be logistics issues that would worsen. I would hope not as bad as it was during [the heightened phases of] COVID-19,” Stephen said.

With the cost of living already high in Barbados, the economist stressed that these developments will place additional strain on consumers, particularly low-income earners. He noted that the impact of rising prices extends beyond Barbados to the global economy.

Stephen recommended finding ways to increase income, acknowledging that cost-cutting measures may have reached their limits. 

“If you can, find ways to make extra income, as mere belt-tightening may no longer suffice,” he urged.

The prominent economist also emphasised the importance of Barbados securing affordable oil supplies in the face of the Middle East conflict, noting that the Russia-Ukraine conflict is also contributing to oil price instability.

He added: “It’s crucial for the Barbados National Oil Company and others to secure cost-effective oil supplies while prices trend upwards. The ongoing Russia-Ukraine conflict and potential alignment of the League of Arab nations with Palestine could further disrupt oil supply routes.”

sheriabrathwaite@barbadostoday.bb