For Bassim Sadiq and his neighbors, this year's observance of the Muslim holy month Ramadan was already difficult: the Baghdad government is tottering, extremist Sunni rebels are threatening a conflagration, and temperatures are pushing past 110 degrees Fahrenheit every day.

Now, food prices have soared to scary levels as a result of the rebels blocking transport routes throughout the country, said Mr. Sadiq, a 45-year-old who works in an outdoor tire-repair shop. For Muslims, who fast during the day but feast at night during Ramadan, it is another blow.

"I see most Iraqis aren't fasting this Ramadan because of the tension and worries as lots of families have sent their children off to fight," Mr. Sadiq said. "All of this in addition to the prices have made Ramadan in Iraq so hard."

It is too soon to declare a food crisis in the capital Baghdad, a city of about seven million people. But some worry that the trade links between Turkey and the capital, as well as Iraq cities farther south, may be squeezed tighter in the days ahead.

So far, Iraq's turmoil has had little effect on its oil exports, which account for more than 95% of the country's income. Still, the country relies on imports for 80% of its food, according to a 2013 report by the U.S. Department of Agriculture, so the impact of instability has been quickly felt.

When Sunni insurgents led by the extremist group Islamic State of Iraq and al-Sham—now calling itself the Islamic State—launched their surprise offensive in northern Iraq early last month, they not only humiliated the country's military and sent more than 500,000 people fleeing. They also severed the supply route between Iraq and Turkey, which had grown to a $9 billion-a-year business after the U.S.-led invasion of the country and the end of economic sanctions against the regime of Saddam Hussein.

Since the fighting started, Turkish exports to Iraq, its second-largest foreign market, have dropped by 30%, said Ercument Aksoy, chairman of the Turkish Foreign Economic Relations Board and owner of an export business.

"We are suffering a lot," Mr. Aksoy said, warning that long-term business confidence in Iraq was imperiled. "We will continue suffering. It will be worse than today if this isn't changed."

Alternate transport routes to Baghdad and the rest of southern Iraq are endangered by the same sectarian divisions that sparked the war, he said.

Iraqi Prime Minister Nouri al-Maliki and other officials in his Shiite-dominated government have accused Turkey of supporting insurgents of the Islamic State. Turkey denies the allegations. But employing Turkish drivers to circumvent Iraq's current conflict zones by transporting goods through Iran and into eastern Iraq puts them in jeopardy from Shiites who predominate there.

The shipment of Turkish goods through the southern Iraqi port of Basra also isn't considered viable by Turkish entrepreneurs, as it would add weeks of transport time and costly refrigeration to prevent spoilage in Iraq's searing summer heat.

That leaves the Kurdish-held region in northern Iraq as the only secure market for the Turkish goods that crowded the shelves of Iraqi stores. "South of Erbil is a danger zone," Mr. Aksoy said, referring to the capital of Iraq's semiautonomous Kurdish region.

The price increases that augur possible widespread shortages are already evident in the Ameer market in the Jadryiya neighborhood of Baghdad.

A package of tomato paste that cost 22,000 dinars (about $19) a few weeks ago now costs 27,000 dinars. Ali Ameer, the market's owner, held aloft a large bag that once bulged with Turkish lentils. He won't be buying more, he said.

"Most of the people preferred the Turkish products because they were lower priced and better quality," he said. Now, he is replacing Turkish-manufactured food products with what he considers inferior local brands.

Across the street, Falah Latif said he may have to close his bakery if wheat shortages continue for the next few months.

The price of a 50-kilogram (110 pound) sack of wheat has stabilized after increasing to 45,000 dinars from 35,000 in early last month, he said. Still, he said, he is losing about 150,000 to 250,000 dinars a day.

Iraqi authorities have accused merchants of price gouging, and have taken steps to rein in inflation.

After the Islamic State began its blitz across Iraq in the days following its capture of the northern city of Mosul on June 10, the Ministry of Interior formed a task force to monitor prices and punish rapacious vendors with fines and even imprisonment, said Mohammed Al Rubaie, a member of the Baghdad Chamber of Commerce.

"Traders are cooperating with the citizens," said another member, Haider Jassim, who said he is working among small businesses in Baghdad to "raise awareness" of the penalties. "It's not interrupting Ramadan."