Woolworths Group Ltd's stock plummeted 9.65% during intraday trading on Thursday, as investors reacted to the company's announcement of a price freeze on essential products amid rising cost pressures.

The grocery retailer stated that from May 1 for the next three months, it will freeze shelf prices on 300 everyday supermarket own or exclusive brands. The company will invest to maintain these prices by absorbing any rising costs agreed with suppliers, which is expected to pressure profit margins.

This comes as Woolworths warned that higher fuel costs and secondary effects are likely to have an increasing inflationary impact moving forward. Additionally, the conflict in the Middle East is creating greater uncertainty for customers and the business environment, though the direct impact on the group to date has been limited.