Food inflation has eased across the eurozone even though analysts had anticipated that elevated energy and fertiliser expenses after the Iran conflict would lift costs.

Nevertheless specialists at Oxford Economics and Deutsche Bank anticipate a renewed increase in food price inflation next year once elevated commodity values move through the supply chain and this summer's harsh weather harms harvests throughout Europe.

Analysts note that food prices usually adjust after a lag because higher energy and fertiliser expenses are initially borne by producers before reaching processors wholesalers and finally retailers.

Oxford Economics projects eurozone food inflation will climb to roughly 3 percent in 2027 up from 1.6 percent recorded in June.

The firm calculates that weather impacts alone could contribute as much as one percentage point to food inflation in the coming year.

Oxford specialists expect food inflation to stay beneath the ECB projection of 2.6 percent this year remaining under 2 percent for the balance of 2026 before advancing in 2027.

"The fertiliser shortfall linked to the Strait of Hormuz closure and the price increase proved milder than feared yet it will still reduce farm output" stated Senior Economist Tomas Dvorak and Lead Economist Ricardo Amaro.

Deutsche Bank researchers determined that although oil and fertiliser values retreated from their highs the March to June commodity surge could still raise food prices by about 1.3 percent in the UK and 0.8 percent in the euro area during the next twelve months adding roughly 0.1 to 0.15 percentage points to headline inflation.

Oxford Economics calculates the recent commodity movement alone may contribute around 0.5 percentage points to eurozone food inflation over the coming year with unprocessed items likely affected earlier than processed goods. It projects this summer's heatwaves could add up to a further one percentage point next year.

Prior to the Iran conflict the benchmark Brent crude oil spot price stood near 72.50 dollars per barrel. Supply interruptions during the fighting drove values to 118 dollars before they eased to around 83 dollars following the truce.

Deutsche Bank anticipates gradual declines over coming months according to futures markets though fresh conflict could alter that path.

Meanwhile the widely used nitrogen fertiliser urea also recorded a sharp spot price rise early in the Iran conflict before retreating. Current retail food prices have not yet incorporated these movements.

Still bank economists warn that although oil and fertiliser prices have dropped from peaks renewed Middle East tensions have again lifted energy costs increasing the chance of additional inflationary effects.

Higher energy and fertiliser expenses reach food prices via two primary routes. Energy powers the entire supply chain from farm machinery and transport through processing packaging and cooling raising overall costs. Fertiliser prices also climb with natural gas expenses increasing producer outlays. These factors require time to appear at retail level energy costs can influence fertiliser within weeks yet reduced fertiliser application or altered planting decisions typically raise food prices only after the subsequent harvest.

Current food prices

Eurozone food inflation has fallen from 2.5 percent year on year in December 2025 to 1.6 percent in June 2026 per Eurostat flash data. This represents the lowest harmonised food inflation figure since mid 2021.

Forward indicators point to continued subdued food price inflation through year end. Reduced food prices have benefited from a robust 2025 grain harvest and excess raw milk supply that lowered dairy values. Prior global disruptions have also faded with chocolate cocoa and coffee prices stabilising after 2025 surges. Olive oil values keep declining from 2022 peaks while lower energy expenses have cut processing costs.

Oxford Economics expects these elements to sustain lower food inflation in the months ahead.

Deutsche Bank observes that dairy sugar and sweets plus coffee drove much of 2025 food inflation yet their influence has since waned. Meat prices though easing from last year's high remain the top contributor to food inflation.

Nearly half of food products have declined in price over the past three months while only about 20 percent posted increases above 2 percent signalling weak food inflation ahead according to Oxford Economics.

Global food and fertiliser prices generally require around one year to reach supermarket shelves. They have largely stabilised for now while farm and wholesale prices also signal subdued food inflation.

Oxford Economics has reduced its forecast for food alcohol and tobacco inflation to 2.1 percent in 2026.

"Yet we believe food price inflation remains positioned to quicken albeit after a longer delay than earlier expected" the report states.

This year's heatwaves raise next year's food costs

Oxford Economics expects food prices to accelerate in 2027 once higher energy processing and packaging expenses pass through the chain. It estimates these elements could add 0.5 to 0.7 percentage points to food inflation with unprocessed items responding sooner than processed ones.

This summer's extreme heat across Europe may exert an even larger effect.

"We consider this summer's heatwaves will exert a stronger upward influence on food prices next year than the conflict" the economists note.

The season's heatwaves and unusually warm dry conditions could affect food prices more than the commodity shock itself. Crop damage is already viewed as certain while additional heatwaves may cut harvests further lifting food inflation in 2027.

A strong El Nino Southern Oscillation event could intensify extreme weather heightening disruption risks.

"The weather impact could intensify further owing to the strong El Nino this year. We estimate it will add up to 1 percentage point to food inflation next year and we will lift our 2027 forecast to around 3 percent" Oxford Economics said.

The anticipated price increase is projected to emerge in the first half of 2027 before easing in the second half.

Long term heatwave expenses

Oxford Economics cites a 2023 ECB working paper showing rising temperatures continue elevating food prices and overall inflation over time with the strongest impact on food. It also found higher temperatures can influence inflation for as long as twelve months after the initial weather event.

The ECB paper estimates that by 2035 global warming could increase global average annual food inflation by 0.92 to 3.23 percentage points depending on the climate path. It further found Europe's 2022 heatwave raised European food inflation by 0.67 percentage points and eurozone food inflation by 0.78 percentage points with largest effects in southern Europe.

Future heatwaves may exert greater pressure on food prices. Under ongoing warming the inflationary effect of extreme summers is expected to grow. The ECB calculates that a heatwave comparable to 2022 under 2035 climate conditions would raise European food inflation by about one percentage point versus 0.67 percentage points today. Researchers note that as the climate warms crops become more susceptible to heat stress so the same heatwave is likely to produce larger harvest losses and stronger food price effects.