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‘Warflation’ hits beyond the gas pump
The war in Iran may be on pause, but its impact on prices isn’t.
“Warflation” continues to spread after weeks of disruption to global oil supplies, and gas prices aren’t the only thing rising — higher energy costs will also result in price hikes for everyday essentials.
Here’s what could get more expensive:
1. Anything that relies on diesel transport
Diesel fuel trucks, construction equipment, farm equipment and marine vessels. As diesel costs rise, so do costs for all kinds of production materials and finished goods.
2. Air travel
Airlines run on jet fuel, and costs are climbing. Airlines are already raising ticket prices and some plan to cut flights to save on fuel. Fewer flights lead to more competition for seats, driving up prices even further.
3. Food
Multiple pressure points are hitting food production. Higher diesel costs raise expenses for farm equipment and delivery trucks. Fertilizers — about a third of which pass through the Strait of Hormuz — are the biggest issue as nitrogen fertilizers and phosphate fertilizers are key to producing food staples like wheat, corn, rice, fruit and more.
Supply disruptions may force farmers to scale back during the spring planting season, which will eventually result in higher grocery prices.
4. Plastics and packaging
Plastic requires oil and natural gas to produce. About 85% of Middle Eastern polyethylene exports move through the Strait of Hormuz, which means disruptions could raise costs for all kinds of finished plastics: water bottles, credit cards, furniture, household items, food containers, car parts and anything that is sealed or wrapped in plastic.
5. Synthetic clothing
Most clothing today is made from petrochemicals, including polyester, nylon, spandex and fleece. The garment industry — especially producers of fast fashion — relies on synthetic fibers sourced through supply chains that run through the Strait of Hormuz. As shortages appear and costs of raw materials rise, the fabric costs will rise, too, and eventually show up in higher prices for clothing.
6. Technology and electronics
The tech and electronic products industry is being affected by dual disruptions. The Strait of Hormuz is a critical shipping route for graphite feedstocks, which are crucial for producing lithium-ion batteries, while helium is needed for semiconductors, fiber optics, electronics and medical devices. Supply disruption could lead to higher prices for smartphones, laptops, EVs, energy storage systems and diagnostic medical equipment like MRI machines.
7. Anything made with aluminum
Gulf countries supply about 9% of the world’s aluminum. They also supply 21% of unwrought aluminum imports and 13% of wrought aluminum imports into the U.S.
Aluminum is essential for constructing buildings, vehicles, airplanes, electrical power transmission, appliances and more. Delays in aluminum exports could hike up the price of construction products, industrial equipment, planes, cars and other machinery.
8. Cars
Plastic and aluminum price hikes, and other supply chain upsets, are likely to drive up costs of vehicles, as well. Any production disruptions abroad have the potential to snowball into U.S. auto production.
Ongoing conditions in the Middle East remain volatile, leaving the global economic outlook uncertain. For a closer look at how the conflict could affect the U.S. economy, read more here.
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