Energy Shock Transmission to Food Inflation in the Context of the Iran War: Evidence from an Input–Output Network Model

This study examines how energy price shocks spread through production networks and lead to food inflation. Recent crises have made such shocks more frequent. We use an input–output price model to trace cost transmission across sectors. Results show a clear supply-chain mechanism. Energy shocks first raise costs in upstream sectors, then pass through intermediate sectors such as chemicals and manufacturing, and finally through distribution channels before increasing food prices. This confirms that inflation is not only demand-driven but also shaped by inter-industry linkages. Similar evidence shows that energy-intensive sectors can amplify economy-wide price changes. Indirect effects are also important, as cost linkages extend across sectors. The findings highlight key transmission channels and systemically important sectors. Policy implications are straightforward. Monetary policy alone is not enough. Targeted measures are needed to stabilize critical sectors such as energy, fertilizers, and transport. In the longer term, improving supply chain resilience and reducing dependence on energy inputs are essential. Overall, the study shows that network-based approaches are crucial for understanding modern inflation dynamics. JEL Classification: C67; E31; Q18; Q43.