The escalation of hostilities involving US and Israeli forces targeting Iran, followed by Iranian retaliation against US allies in the Persian Gulf, has sent shockwaves through global energy markets. The recently announced ceasefire, while obviously a step in the right direction, is still to bring signs of improvement.
Since the conflict began, drone and rocket attacks on tankers have sharply increased risks, driving maritime insurance costs to prohibitive levels and contributing to a decline of more than 70% in shipping activity through the strait. The disruption has immediate and far-reaching implications.
According to the International Food Policy Research Institute (IFPRI), a prolonged conflict could significantly constrain global trade with the Persian Gulf, pushing energy and fertilizer prices higher and threatening food security, particularly in Gulf nations that rely heavily on imports of grains, oilseeds, and vegetable oils transported through the strait.
The ripple effects could extend well beyond the region, affecting agricultural production costs and food prices worldwide. As mentioned, fertilizer markets are under intense pressure. Reduced shipments of natural gas, a key input for nitrogen-based fertilizers, have driven up costs, while exports from Gulf producers such as Qatar, Saudi Arabia, Bahrain, and Oman have dropped sharply.
The larger issue is the fact that even if the conflict ends sooner rather than later, its impact on the global food chain will remain. Despite different scenarios showing immediate relief on costs, the reality is that such a decrease will happen gradually. As such, it is still early to know the real impact these months will have on shelf prices, and which will inevitably translate into lower consumption.
This isn’t an issue affecting some categories, but one that will touch every segment of the market. So, we circle back to the question that seems to be asked way too often these days: will supply chains become more resilient for the future? Let me know your thoughts at bogdan.angheluta@trade.media.