Fertilizer Prices Are Surging, and Food Costs Could Be Next. Why the Iran Energy Shock Runs Much Deeper Than Your Gas Bill

If you have filled your gas tank up lately, you probably watched the cost tick higher with a cringe. That's the first real-world impact of higher oil prices, and it happens fairly quickly. But it is not the only impact consumers will see from the ongoing geopolitical conflict in the Middle East. Here's what you need to know before sticker shock hits you in the grocery store.

What is energy used for?

Higher gasoline prices make it clear that transportation is a key market for the energy sector. You are seeing high oil prices hit your wallet right now. But you aren't alone; companies are facing higher fuel costs as well. That will have an impact throughout the economy.

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For example, United Parcel Service (NYSE: UPS) and FedEx (NYSE: FDX) have both announced increased fuel surcharges. Truckers like XPO (NYSE: XPO), which has been increasing its fuel surcharges, are doing the same thing. Even Amazon (NASDAQ: AMZN) is hitting its sellers with a fuel and logistics surcharge. In fact, Delta (NYSE: DAL) just announced it has raised its fee for checked baggage, following a string of airline competitors that did the same thing. Even airlines are finding ways to charge customers more for transporting things!

Delta's move hits you directly, but UPS, XPO, and Amazon are currently putting the cost back on customers who are shipping goods. Eventually, that will lead to higher prices when you go to a store, as companies look to protect their margins by passing on the costs to you.

Food presents an additional risk

The inflation risk runs far deeper, particularly in food. Not only does food need to be transported, but it also needs to be grown. Natural gas is used to make fertilizer, and the Middle East is a key supplier of both natural gas and fertilizer. The tensions in the Middle East have disrupted the fertilizer market, leading to higher prices for these vital crop nutrients.

There are actually two problems here. First, rising farming costs will be passed on to buyers, such as food makers Conagra (NYSE: CAG) and General Mills (NYSE: GIS). They, in turn, will attempt to raise the prices of their products to protect their margins. That is on top of any increases that flow through from higher transportation costs.

However, there's a second effect that you shouldn't ignore. If the supply/demand imbalance in the fertilizer market is severe, farmers may be unable or unwilling to buy all the nutrients they need. That could affect the amount of food grown. If crop yields fall, then there could be supply/demand issues in the farm sector, too, pushing ingredient prices higher. This could result in a lingering pinch on your wallet, since it takes time to grow crops, and once the window for fertilization is missed, there is no going back until the next growing cycle.

Food makers are already under pressure

Conagra is an interesting example because the company's margins are already under pressure. In the fiscal third quarter of 2026, the company's adjusted operating margin was 10.6%, down from 12.7% in the same period of the prior year. The company, along with many others that supply your local grocery store with food, are likely to pass its rising costs on as quickly as it can.

In fact, that's exactly what General Mills' fiscal third-quarter 2026 earnings release highlights is happening. It noted that rising input costs drove operating margin down 310 basis points. But it was able to offset the full impact of those higher input costs, partly by increasing prices. In other words, you should brace your wallet because higher food costs look like they are already baked into the cake.

Reuben Gregg Brewer has positions in General Mills. The Motley Fool has positions in and recommends Amazon and United Parcel Service. The Motley Fool recommends Delta Air Lines, FedEx, and XPO. The Motley Fool has a disclosure policy.