Managing costs on the farm: the impact of the Middle East conflict
By Chris Wright, Consultant and ARA specialist
Since late February 2026, the conflict in the Middle East has sent a significant shockwave through the costs of running a farm in the UK.
For businesses already operating in a difficult environment the additional cost pressure is arriving at a particularly challenging moment.
The immediate impact on fuel and fertiliser
The closure and disruption of the Strait of Hormuz, through which a large proportion of global oil, gas and fertiliser trade flows, has had a direct and rapid effect on UK farm input prices.
Fertiliser prices are reported to have risen by approximately £50 per tonne above early 2025 levels and the situation remains volatile. Some traders have suspended fixed-price quotes entirely as the market continues to move.
Red diesel has also risen by around 60 per cent compared with the start of 2026, moving from approximately 63p per litre to over £1 per litre at its peak. This cost is likely to rise again, given the fragility of the current ceasefire at the time of writing.
Arable farm income was already under severe pressure before the current crisis. Defra figures published earlier in 2026 estimated average arable farm income had fallen to around £17,000 in the year to February 2026 (the lowest level since 2004).
The challenge for farm businesses
The core challenge is one that many farmers will recognise from previous periods of market volatility. Costs rise quicker than farm gate prices set by markets that UK producers cannot control.
There is no simple solution to a cost shock of this kind, but there are practical steps that farming businesses can take to limit the impact and plan more effectively:
- Review variable costs urgently — Identify where reductions in input use are possible without material impact on yield. Precision application technology, where available, can help target fertiliser and fuel use more efficiently.
- Reduce cultivation where possible — Min-till or no-till approaches can cut fuel consumption significantly on arable operations without necessarily sacrificing output.
- Review forward contracts and buying strategies — For cost inputs that can be purchased ahead, taking positions when the market allows a degree of price certainty is important. However, the current volatility makes this difficult.
- Assess the impact on cash flow — Higher input costs mean cash requirements are rising at the same time as margins are squeezed. Reviewing overdraft limits and working capital facilities now, before a cash shortfall arises, is preferable to seeking finance under pressure.
- Consider whether there are any tax reliefs or loss relief claims available if the business moves into loss — As discussed elsewhere in this bulletin, HMRC rules allow losses to be used in ways that can generate genuine cash recovery.
The outlook
The duration and ultimate resolution of the Middle East conflict remains uncertain. UK crop prospects for 2026 are reported to be generally positive following a strong autumn and a reasonable start to the growing season.
However, the NFU has warned that if fuel and fertiliser prices remain elevated, wider food price inflation is likely to follow, creating further uncertainty for businesses planning ahead.
If you would like to discuss how this may affect your farming business, the Moore Thompson ARA team would be happy to help. Please contact us at 01775 711333.