Inflation is not going away any time soon in Europe. The continuing blockade in the Strait of Hormuz has driven up oil and gas prices and, ahead of winter, new headaches are also emerging for the agri-food sector. Earlier this week, wheat prices forecast for December on Euronext exceeded €255 — a high not seen in years. This is the result not of recent droughts but of geopolitical tensions.

Since July, attacks on energy and port infrastructure — as well as on ships around the ports of Odesa in Ukraine and Novorossiysk in Russia — have intensified, damaging the main export routes for grains for both countries. As a result, exports have come to a near-halt. Reports of a new Russian offensive also rattled markets, dimming hopes of a swift recovery and forcing importers to look for alternative, more expensive suppliers. US grain trader ADM notes that the risk of renewed attacks in the Black Sea is increasingly shifting the narrative from one of temporary disruption to a structural reduction in supply.

Ukraine and Russia account for 27% of global grain exports, with a combined total of just over 65 million tons in 2024-25. August and September are usually prime months for grain exports from the region. Amid the recent attacks, though, exports have at least halved. The new harvest is in, and storage is full, yet the damage to port infrastructure and export routes prevents ships from leaving. In August, Russia usually exports five million tons. This year, however, it only managed around three million. Ukraine shipped only 590,000 tons, less than a third of its usual total.

These large quantities of grain are missing from the usual supply stock at a critical time ahead of the winter, with many countries across Africa, Asia and the Middle East highly dependent on imports. It also has implications for diplomacy. Russia has used its wheat exports as a diplomatic weapon, selling the commodity at a discount in return for support. But without wheat, Moscow’s bartering power has declined significantly. Its customers cannot wait for Russia to rebuild its port infrastructure.

Wheat traders are already turning to other supplies in Europe. The first alternative is so-called CVB wheat from the port of Constanța in Romania, and from Varna and Burgas in Bulgaria. These three ports are currently the key export hubs for moving grain from Europe to Asia, Africa and other markets.

France, as the largest supplier of wheat in the EU, is benefiting from the situation. Last month, grain ships left the country for Sudan for the first time in 18 years. Meanwhile, Tunisia’s state agency has secured a massive order of 125,000 tons of soft wheat in an import tender. France can still cope with the increase in demand despite the recent droughts. While the wheat harvest was not bountiful, it was less affected than other crops. For instance, corn production almost halved, prompting prices to surge by 35% since mid-June.

Price movements now track announcements from Russian, Ukrainian, or even Turkish officials. French wheat is becoming competitive again after very low prices and rising production costs over the past two years. The downside is that higher prices also feed into inflation, while the low corn yield raises demand for wheat to feed European livestock. The result is higher prices for poultry, eggs and all processed food. Considering that the latest annualized inflation rate for the euro area was 3.3% in August, up from 2.9% the previous month, the problem is set to stay for some time.

This is an edited version of an article that first appeared in the Eurointelligence newsletter.