Nobody knows how long the current oil shock will last. While the consensus is that the war itself might end in the coming weeks, it is far from clear that the Strait of Hormuz will be as open as it was pre-war, with the risk premium associated with Middle East oil remaining elevated, according to a report by CIBC.
“Therefore it’s not unreasonable to expect oil prices to remain elevated over the balance of the year, with the futures market now pricing in a $75 WTI barrel around the end of 2026 — roughly 20% higher than the price seen before the conflict. Should there be material damage to the oil production and distribution infrastructure, even a quick end to the conflict would leave a longer path back to pre-war supply conditions. There are of course major macroeconomic implications of such a shock, with a critical one being on the agrifood industry,” said the CIBC.
“The modern agrifood industry is built on the foundation of cheap energy, a dependency that has only grown as the sector strives to maximize yields on a fixed amount of arable land. However, while oil prices remain elevated, that model faces cost pressures. Agriculture is highly energy-intensive, so as energy costs climb, so does the cost of producing and delivering food. What makes the current surge in oil prices even more significant is the fact that it is occurring in the midst of planting season, and food prices are already almost 20% above their pre-Covid trend line.”
The longer the price pressures are sustained, the more we have to look at the secondary impacts of higher energy prices. The high energy-intensity of agrifood means that food inflation will be one of the major casualties of the current oil price shock, lifting already high food prices even higher, added the CIBC.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Entrepreneur. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 and 2024 as one of the top business journalists in the world by PR News. He was also named by RETHINK to its global list of Top Retail Experts 2024, 2025 and 2026.
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