This is why geopolitical energy shocks are often described as “inflationary events”, even if consumer price indices do not immediately capture their full impact. The real cost of living may rise not only through higher prices, but also through a decline in what those prices buy.
Economists might describe this process as a form of “hidden inflation”, where businesses respond to rising costs by quietly altering product composition or reducing service levels rather than raising prices outright.
Analysis of recent cost pressures suggests that recipe reformulation, ingredient substitution and service reductions have become common strategies for firms attempting to manage higher input costs in sectors such as food manufacturing, retail and hospitality.
If instability in the Middle East continues to disrupt shipping routes and energy markets, the UK could face renewed inflationary pressures. But for households, the effects may not always appear in official statistics.
Instead, they may appear in smaller portions at restaurants, reduced service levels in hospitality, or supermarket products that look familiar but contain slightly cheaper ingredients. These incremental adjustments are harder to measure than price changes but shape everyday consumer experiences through a gradual erosion of value.
Erhan Kilincarslan is a Reader in Accounting and Finance at the University of Huddersfield. This article first appeared in The Conversation.