Meals inflation is lastly beginning to ease throughout the eurozone, offering some reduction to family budgets after years of hovering meals costs.
However economists warn that this respite could not final lengthy.
This summer season’s heatwave has changed the latest Iran struggle as the largest threat to subsequent yr’s meals costs, with drought and heatwaves threatening crops throughout Europe and elsewhere.
“We expect this summer season’s warmth wave can be a stronger driver of meals costs subsequent yr than struggle,” Thomas Dvorak, senior economist at Oxford Economics, mentioned in a brand new report.
The warning got here regardless of issues earlier this yr that hovering oil and fertilizer costs brought on by the Israeli-Iranian battle would shortly trickle all the way down to grocery store cabinets.
These issues have allayed after the ceasefire, when oil and fertilizer costs fell. Economists say international commodity shocks sometimes take a few yr to go by to customers, that means an earlier spike might put some upward stress on meals costs as early as 2027.
Economists at Oxford Economics and Deutsche Financial institution anticipate meals value inflation to select up once more subsequent yr as larger commodity costs trickle down the meals provide chain.
Rising prices of vitality and fertilizers have an effect on meals costs by two predominant channels. First, vitality is used all through the meals provide chain, from tractors and transportation to processing, packaging, and refrigeration, which will increase manufacturing prices. Second, the worth of fertilizer will rise together with the price of pure gasoline, rising bills for farmers. It takes time for these prices to succeed in grocery store cabinets. Whereas vitality costs can have an effect on fertilizers inside weeks, meals costs sometimes solely enhance after the following harvest resulting from lowered fertilizer use or adjustments in crop planting.
Oxford Economics estimates that the mixed results of rising oil, fertilizer and agricultural costs might enhance meals inflation within the euro space by round 0.5 share factors over the following yr. The influence is anticipated to unfold in levels, hitting recent meals first earlier than processed meals.
However now the larger uncertainty is the climate. Excessive temperatures and drought can cut back crop yields and enhance costs for fruits, greens, grains, and different agricultural merchandise. Oxford Economics estimates that meals inflation might rise by as much as 1 share level subsequent yr resulting from climate alone, and meals inflation within the euro space might rise to round 3% in 2027.
The report estimates that the influence of climate alone might enhance meals inflation by as much as 1 share level subsequent yr.
Economists at Deutsche Financial institution mentioned the March-to-June commodity shock might push meals costs up by about 1.3% within the UK and 0.8% within the euro zone over the following 12 months, though oil and fertilizer costs have fallen from their peaks. This is able to enhance the general inflation price by roughly 0.1 to 0.15 share factors.
Why meals inflation continues to be slowing
Eurostat’s preliminary estimates present that meals inflation within the euro space has fallen from 2.5% year-on-year in December 2025 to 1.6% in June 2026. That is the bottom harmonized meals inflation price since mid-2021.
Main indicators counsel meals value inflation could stay subdued for the remainder of the yr. This slowdown was supported by a powerful grain harvest in 2025 and a glut of uncooked milk that lowered dairy costs.
Chocolate, cocoa and low costs have stabilized after surging in 2025, and former international shocks have eased. In the meantime, olive oil costs proceed to fall from their report highs in 2022, whereas decrease vitality prices have lowered meals processing prices.
Oxford Economics expects these components to maintain meals inflation subdued within the coming months, reducing its 2026 meals, alcohol and tobacco inflation forecast to 2.1%. “Nonetheless, we imagine meals value inflation continues to be more likely to speed up, solely with an extended lag than beforehand assumed,” the report mentioned.
Economists at Deutsche Financial institution additionally level to easing value pressures. Futures markets counsel that international meals and fertilizer costs will stay largely steady, whereas vitality costs will progressively decline within the coming months. Farmgate and wholesale costs additionally proceed to counsel subdued meals inflation.
Nonetheless, they warn that renewed geopolitical tensions might reverse that pattern.
Why this summer season’s heatwave might increase meals costs subsequent yr
This summer season’s warmth wave and unusually heat and dry situations might have a much bigger influence on meals costs than the commodity shock itself. Crop injury is already thought-about inevitable, however additional heatwaves might additional cut back yields and result in larger meals inflation in 2027.
A robust El Niño occasion might intensify excessive climate occasions and enhance the chance of additional disruption.
Oxford Economics mentioned: “This yr’s significantly sturdy El Niño might additional exacerbate the influence of hostile climate situations. We anticipate meals inflation to rise by as much as 1 share level subsequent yr, elevating our forecast for 2027 to round 3%.”
The worth surge is anticipated to look within the first half of 2027 after which progressively ease within the second half.
Lengthy-term prices of heatwaves
Oxford Economics factors to a 2023 ECB working report that discovered that rising temperatures will proceed to push up meals costs and general inflation over time, with the strongest influence on meals. We additionally discovered that rising temperatures can proceed to have an effect on inflation for as much as 12 months after the preliminary climate shock.
The ECB’s working paper estimates that international warming might enhance international common annual meals inflation by 0.92 to three.23 share factors by 2035, relying on local weather situations. It additionally discovered that the 2022 European heatwave elevated meals inflation in Europe by 0.67 share factors and meals inflation within the euro space by 0.78 share factors, with southern Europe having the best influence.
Nonetheless, future heatwaves might have an excellent larger influence on meals costs. As warming continues, the influence of utmost summer season inflation is anticipated to extend. The ECB estimates that if a heatwave just like 2022 have been to happen beneath 2035 local weather situations, meals inflation in Europe would rise by round 1 share level, in contrast with the present 0.67 share level. The researchers argue that because the local weather warms, crops grow to be extra weak to warmth stress, that means the identical warmth wave is more likely to trigger better crop losses and stronger meals value pressures.
