Energy Price Shocks and Food Price Dynamics during Geopolitical Crises in the European Union

This study aims to identify the principal determinants of food price fluctuations and to explore the relationship between food and energy price fluctuations during periods marked by geopolitical instability. The research implements the analysis of 27 European Union states, in particular EU–14 (developed, high-income, advanced economies), EU-13 (less developed, emerging economies), over the time from 1995 to 2021. Using the panel data, the study investigates the influence of geopolitical risk and energy market uncertainty on food price dynamics. Empirical findings indicate a significant positive relationship between energy prices and food prices. Changes in gas prices lead to larger changes in food prices because of its central role in various stages of the food supply chain, including production, processing, and distribution. Gas prices are higher in the EU–13 countries than in the EU–14 countries. An increase in gas prices leads to a larger price increase in less developed EU–13 countries than in developed EU–14 countries. Furthermore, the analysis distinguishes between the effects of geopolitical threats and those of geopolitical acts. Geopolitical threats and events have a greater impact on food prices in the EU–13 than in the EU–14, although these factors are significant for both groups. The results reveal that perceived threats, which elevate uncertainty and provoke anticipatory market behavior, exert a stronger and more enduring influence on food price volatility than the geopolitical acts themselves. This finding underscores the critical role of market expectations and risk perception in shaping food price trajectories.