What is the relationship between war and prices?

War can cause prices to rise quickly due to higher costs for businesses, which are then passed on to consumers.

How does war disrupt supply chains and affect trade?

War can disrupt supply chains, increasing the cost of transporting goods and impacting trade between countries.

What is the impact of ceasefires on inflation?

Ceasefires can help reduce the immediate fear premium in markets, leading to lower energy prices and a cooling effect on inflation.

How do ceasefires affect the behavior of businesses and households?

Ceasefires can lead to changes in behaviour for businesses and households, such as adjusting spending and wage demands, which can impact inflation in the long term.

War, ceasefires and the effect on inflation

CREATED BY ROGER EDDOWES

Published: 16/04/2026 @ 09:00AM

#WarAndInflation #CeasefiresAndPrices #EnergyPricesAndInflation #SupplyChainsAndPrices #WagesAndCostOfLiving

War can push up prices fast, while ceasefires often calm them without fixing everything. In this blog post, I want to look at the effect on inflation, from energy prices and supply chains to wages, the cost of living, and what happens when markets start guessing again ...

The effect on inflation of war and ceasefires is a crucial aspect to consider in economic analysis

When conflict threatens shipping lanes, pipelines or power plants, businesses face higher costs almost immediately, and those costs are rarely absorbed for long. They are passed on quickly, which is why households feel the cost of living rising even before headline inflation fully catches up.

The mechanism is not mysterious!

One of the biggest causes of inflation is supply chain disruption, and war is an expert at creating exactly that. Oil, gas and fertiliser become more expensive to transport, insurers raise premiums, and retailers pay more to get goods into shops.

Even countries far from the battlefield can be affected because modern trade is interconnected and energy prices do not respect borders.

Ceasefires usually help by removing the most immediate fear premium from markets. Traders relax, shipping routes reopen, and energy prices cool. That said, the effect on inflation is not always fully reversed, as companies may have already locked in higher contracts, slowly repaired supply chains, or kept prices elevated to rebuild margins.

Peace can certainly cool the flames, but it
does not always put out the fire!

That is why economists often treat ceasefires as inflation relief rather than as inflation cures. If a war has lasted long enough, businesses will have changed their behaviour, households will have adjusted their spending, and wage demands may have risen to protect real incomes.

The effect on inflation then becomes a second-round story, shaped not only by barrels of oil but also by expectations, bargaining power, and whether firms expect higher prices to persist.

In Britain, this matters especially because we import so much food and fuel that they directly affect the domestic price basket. A rise in shipping costs, a jump in domestic gas prices, or a prolonged period of high oil prices can all keep inflation stubborn even after the headlines improve. A ceasefire may lessen the immediate shock, yet still leave the Bank of England watching for signs that the effect on inflation is lingering through wages and services.

The longer the uncertainty lasts, the more
careful central banks have to be!

If markets believe a ceasefire will hold, rate pressures can ease. If they suspect fighting could return, the effect on inflation may remain stubbornly elevated as firms build in a risk premium and households remain cautious. In the end, war raises inflation by squeezing supply and confidence, while ceasefires usually help restore both.

But the effect on inflation fades more slowly than the fighting itself.

Until next time ...

ROGER EDDOWES
Join our mailing list! Click here and be one of the first to know when we publish a new blog post!

Would you like to know more?

If anything I've written in my blog post resonates with you and you'd like to discover more of my thoughts about war, ceasefires, and the effect on inflation, then do call me on 01908 774320 and let's see how I can help you.

Don't forget to stay updated with our daily social media posts on Facebook.

Share the blog love ...

Buffer

Facebook

Twitter

#WarAndInflation #CeasefiresAndPrices #EnergyPricesAndInflation #SupplyChainsAndPrices #WagesAndCostOfLiving

About Roger Eddowes ...

Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.

Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.

More blog posts for you to enjoy ...

		Are you thinking of employing young workers this summer? The summer holidays are a popular time for young people to gain their first work experience, and many businesses welcome the extra help during their busiest months ......
		Why Artificial Intelligence is changing recruitment Artificial intelligence is no longer something businesses are simply experimenting with, and it is rapidly becoming part of everyday life, especially in recruitment. The latest AI hiring trends suggest that this shift will on...
		Growing our team to support yours At Essendon, we believe that good accounting is about more than numbers. It's about giving business owners confidence that everything is organised, properly handled, and under control ......
		Millions of taxpayers could soon have to pay their tax earlier Millions of taxpayers could pay their tax earlier under HMRC's proposed self-assessment changes. The move may smooth tax deadlines, but it could also tighten cash flow. For many, the real issue will be how quickly the system ...
		Rising labour costs, energy bills and late payments are holding businesses back This pressure is feeding straight into weaker cash flow and tighter margins for everyone. Businesses are finding it harder to plan, price and grow when expenses keep climbing faster than demand. It is a messy combination, and...
		HMRC announces tax simplification changes for employers and businesses I read with interest an announcement by HMRC about a series of measures designed to simplify the tax system, reduce administrative burdens and make it easier for businesses to meet their tax obligations. While many of the pro...
		Who's going to pay for Burnham's Britain? Burnham's Britain sounds bold, but the maths still has to work. If taxes rise, borrowing climbs, or spending is squeezed, somebody pays. The tricky part is making the politics add up without breaking the economy ......
		How to spend less and save more without feeling deprived Want to spend less and save more? My blog post today explains how to spot waste, trim bills, and build better habits without feeling restricted. It also covers budgeting, debt, and practical checks that can quietly improve yo...

Other bloggers you may like ...

		Browser notifications, SMS or email: choosing the right check-in setup Posted by Steffi Lewis on https://www.yourping.uk Not everybody uses technology in the same way. Some people practically live on their phones, while others still prefer a traditional text message or e ...
		10 things every new property investor should look for Posted by Sarah Hannaford on https://blog.sarahpasolutions.co.uk Getting started in property investing can feel a little overwhelming. There are endless podcasts, YouTube videos, and articles telling you the 'perfec ...
		New dividend disclosures for close company directors explained Posted by Helen Beaumont on https://blog.essendontax.co.uk Dividend disclosures on the new SA102 boxes can feel fiddly at first, but the key point is simple. If the person is a director of one close company, t ...
		Your sBlogIt! Blog Works 24/7 To Promote Your Small Business Posted by Steffi Lewis on https://www.sblogit.com Explore the compelling weekly business blogging benefits that can boost your small business around the clock. Consistent blog posts enhance search vis ...