The conflict in the Middle East has disrupted trade through the Strait of Hormuz and could affect global food markets through its impact on fertilizer and energy supplies.
The strait is a key shipping route not only for oil and gas but also for fertilizers used in agriculture. Analysts say disruptions could lead to higher farming costs, lower crop yields, and higher food prices.
"Higher energy and input costs risk reigniting global food inflation just as retail food prices had returned to more historical levels in many countries," according to the International Food Policy Research Institute (IFPRI).
Raj Patel, research professor at the University of Texas, said fertilizer supply chains linked to the strait could influence agricultural production in several regions.
"The short answer is: significant, and faster than people think," Patel said. "The Strait of Hormuz is a fertilizer chokepoint. Qatar, Saudi Arabia, Oman, and Iran together supply a substantial share of the world's traded urea and phosphates, and virtually all of it transits Hormuz."
Countries dependent on imported food or fertilizers could face rising costs within weeks, particularly during planting periods.
Countries in the Gulf region are expected to face the first effects. "Regionally, consumers in the GCC are most exposed to short-term food price spikes due to their heavy reliance on maritime imports transiting the Strait of Hormuz," said Bin Hui Ong, commodities analyst at BMI.
Persian Gulf economies such as Qatar, Bahrain, Kuwait, and Saudi Arabia rely heavily on food imports shipped through the Strait of Hormuz. If shipping remains constrained, supplies may need to move through alternative corridors or be transported overland at higher cost.
"When it comes to short-term shortages, all countries around the Persian Gulf west of Hormuz will struggle to get food imports in," said Rabobank's Mera. "These countries will need to find alternative routes."
Outside the Gulf region, Sub-Saharan Africa may also be affected due to its reliance on imported fertilizer and the share of household income spent on food. Data from the University of Texas at Austin indicates that more than 90 per cent of fertilizer used in the region is imported.
South and Southeast Asia could also face higher input costs. Agricultural economies, including India, Bangladesh, Thailand, and Indonesia, rely on fertilizer imports from Gulf producers.
"A farmer in Thailand who is 90% import-dependent, buying urea that's made from gas, shipped through Hormuz, and priced in dollars that are strengthening because of geopolitical risk, faces a cost shock on every dimension simultaneously," Patel said.
Brazil could also face rising costs if fertilizer supplies tighten. The country imports about 85 per cent of its fertilizer, which supports soybean and maize production.
"The bigger impact on consumer prices will not be the impact on agricultural commodities but the fact that energy is a big portion of the total retail food bill," said Joseph Glauber, senior research fellow at IFPRI.
Source: CNBC
